DEPARTMENT store Debenhams has fallen into administration after rejecting a £200million bid from Sports Direct tycoon Mike Ashley.
The retailer employs around 25,000 people but why has it turned down an offer that could potentially rescue the chain and which stores could be closing?
Getty Images – Getty Debenhams has announced that it’s going into administration
Is Debenhams heading for administration?
Yes. Debenhams announced that it had gone into administration on April 10 as part of a pre-pack administration deal.
A “pre-pack administration” is an insolvency process for a business to sell its assets before appointing administrators.
It is a powerful way of selling on a business to a third party buyer.
This doesn’t mean that Debenhams will disappear from the high street but some stores will still close.
The retailer says it may be some months before it reveals which branches will be affected and adds that branches are unlikely to close before 2020.
Debenhams currently has 166 stores, which will continue to trade for now, although 50 branches had already been ear-marked for closure.
Why did Debenhams reject Mike Ashley’s offer?
The department store turned down two offers made to buy the firm by Mr Ashley – a business tycoon who owns the likes of Sports Direct, House of Fraser, and Newcastle United.
He already owns 30 per cent of Debenhams but the board turned down his offers because they didn’t want him to take on the role of chief executive.
Mr Ashley’s attempts to take control of Debenhams had become increasingly desperate, and over the weekend the businessman demanded the board be investigated, two members undergo lie detector tests and trading in its shares to be suspended.”
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Are stores closing?
We don’t know yet which stores will close as a result of the administration.
But Debenhams had already announced that it would be closing 50 stores over the next five years.
In October 2018, Debenhams earmarked up to 50 shops – just under a third of its total – for closure in the next five years if it continued loss-making.
Sergio Bucher, Debenhams’ chief executive, told the BBC at the time that the stores were “contributing positively” to the business, but added: “However, rolling forward current trends, we do not believe they will remain profitable in future years and therefore we intend to exit these stores over the next three to five years”.
The announcement came as the department store chain reported a pre-tax loss of £491.5million – and sales also sharply fell over Christmas.
Debenhams falls into administration with 50 stores to close as part of deal to save the chain
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