Mike Ashley's firm poised to 'torpedo' rival's recovery

Feb 23 2010 By The Journal

NEWCASTLE United owner Mike Ashley's Sports Direct group looks set to scupper a recovery plan at rival Blacks Leisure after it bought 28.5% of the outdoor retailer’s shares.

The firm has been locked in a dispute with Ernst & Young, the administrator of collapsed bank Kaupthing Singer & Friedlander, over the ownership of the Blacks stake and an 11% holding in JD Sports Fashion since October 2008.

But yesterday it said Ernst & Young had sold the stakes to its Sportsdirect.com retail business and it "currently intends to vote against the resolutions proposed" at Blacks’ investor meeting tomorrow (Wednesday).

Retailer Blacks has said the £20m fundraising plans, which are due to be voted on at the shareholder meeting, mark the "crucial growth phase" of its recovery after a deal with landlords in November helped secure its future.

The group, which operates its own brand shops, as well as the Millets chain, is planning up to 35 new stores and the refurbishment of existing sites.

Sports Direct, which is controlled by Mr Ashley and operates the Sports World chain, did not give a reason for its aims to torpedo the Blacks fundraising.

However, it did say the decision to vote against the plans was "subject to review and final determination by the board of directors" before the meeting. The ownership dispute itself is currently in the hands of the courts and is thought to be set to continue regardless of the share acquisition.

Blacks needs 75% of the shareholder vote to back its fundraising plans at this week’s meeting. The firm said it was seeking "further clarification" of Sports Direct’s intentions.

Kate Heseltine, of Seymour Pierce, said she continued to view the business as being "in a substantially stronger position" following its deal with landlords.

"Although this may prove detrimental to Blacks restructuring plans, there is presently insufficient information, or indeed certainty over the outcome of such ownership disputes, to alter our view on Blacks," she said. Sportswear firms in the UK have a habit of buying strategic stakes in their rivals, with Sports Direct one of the industry’s most prolific share owners.

The firm suffered a £53.1m write- down on the assets held in Blacks and JD Sports last July after Kaupthing, its Icelandic banking partner that had partly funded the holdings, went into administration.

At the time it said that while it still considered itself the holder of the stakes, it had concluded that it "may not ‘control’ the shares for accounting purposes". The firm later also sold off a 4.8% holding in another rival, JJB Sports.