By John Considine
Today's Financial Times ran with a headline "City digest outsider Ashley's 'stroke of genius' Debenhams deal". It is probably surprising for sports fans to find Mike Ashley and the phrase a "stroke of genius" to appear side-by-side. During his time as owner of Newcastle United the word "controversial" has been used more often than "genius". He bought the club in 2007 and in the first couple of years he lost Geordie idol Kevin Keegan and the club got relegated. He then threatened (or promised) to sell the club. At the end of 2010 he controversially sacked Chris Hughton - the manager that won them promotion. Less that two years later he shocked the football world by giving Hughton's replacement, Alan Pardew, an eight year contract. Last summer he appeared to undermine Pardew with the controversially appointment of Joe Kinnear as director of football. He also presided over a controversial naming rights issue for St. James Park (for a time the Sports Direct Arena) and a controversial shirt sponsor in Wonga.
What has the Financial Times singing his praises? Yesterday, it reported that Sports Direct, a retailer in which Ashley has a 62% stake, spent £50m gaining a 4.6% stake in Debenhams. Yesterday, it reported that it might be part of a strategy to facilitate the sale of sports goods in Debenhams. Yesterday, it noted that the price of Debenhams shares fell by 2.5%. In many ways this was all pretty straight forward. However, in the space of 24 hours the reporting became more excited.
As his football related decisions demonstrate, Ashley is no stranger to a bold move. Ashley proceeded to write a put option on a 6.6% stake in Debenham's. Writing in today's FT, Allson Smith claimed it was a smart but rarely used tactic. In buying the option from Ashley for a premium, the undisclosed third party can exercise the option in a year at a pre-agreed price. If the price of the shares increases then the buyer will exercise the option and Ashley will keep the premium. If the price of the shares fall then Ashley will be left with 6.6% of Debenhams. One suggestion is that it is a cheaper way for Ashley to acquire a larger share. Others believe the move will align the fortunes of Debenhams and Sports Direct in a way that could encourage Debenhams to open up to working more closely with the sports retailer.
It seems things are looking up for Mike Ashley. The Financial Times is expressing admiration for his latest move. Newcastle have the second longest manager in the Premier League. They have performing strongly over recent months. Even the criticism of the fact that they only made one loan signing during the summer (Loic Remy) has since been silenced by the scoring exploits of the French man. Newcastle fans will hope the good press continues.
As his football related decisions demonstrate, Ashley is no stranger to a bold move. Ashley proceeded to write a put option on a 6.6% stake in Debenham's. Writing in today's FT, Allson Smith claimed it was a smart but rarely used tactic. In buying the option from Ashley for a premium, the undisclosed third party can exercise the option in a year at a pre-agreed price. If the price of the shares increases then the buyer will exercise the option and Ashley will keep the premium. If the price of the shares fall then Ashley will be left with 6.6% of Debenhams. One suggestion is that it is a cheaper way for Ashley to acquire a larger share. Others believe the move will align the fortunes of Debenhams and Sports Direct in a way that could encourage Debenhams to open up to working more closely with the sports retailer.
It seems things are looking up for Mike Ashley. The Financial Times is expressing admiration for his latest move. Newcastle have the second longest manager in the Premier League. They have performing strongly over recent months. Even the criticism of the fact that they only made one loan signing during the summer (Loic Remy) has since been silenced by the scoring exploits of the French man. Newcastle fans will hope the good press continues.
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