A closed Debenhams department store on London’s Oxford Street. Failure to secure a deal would probably result in the liquidation of the company, which traces its history back to 1778
Failure to secure a deal would probably result in the liquidation of the company, which traces its history back to 1778 and employs more than 12,000 people © AFP via Getty Images

JD Sports has emerged as the last remaining bidder for Debenhams, as the historic department store chain’s battle for survival nears its conclusion.

An agreement on the business’s future is likely to be reached within days, according to two people briefed on the process.

Failure to secure a deal would be likely to result in the liquidation of the company, which traces its history back to 1778 and employs more than 12,000 people.

Debenhams’ UK business entered administration in April to protect it from creditors while it restructured to cope with the coronavirus pandemic. It has closed some stores, secured new lease terms on many others and cut thousands of jobs.

Investment bank Lazard has been running an auction process since July. A second auction for the smaller and more upmarket Danish operation commenced a few weeks later.

JD Sports and Debenhams both declined to comment.

Shares in JD Sports fell more than 6 per cent on Tuesday after the news, which was first reported by The Times.

Frasers, the owner of Sports Direct and House of Fraser that also expressed interest, has accused Lazard and administrators FRP of ruling it out of the bidding because it was “not able to reach their reserve price”.

Frasers, run by retail tycoon Mike Ashley, said it could not raise its offer unless the advisers provided more financial information about Debenhams.

But lawyers point out that the main hurdle for any would-be bidder in an administration was matching the value available to creditors through other means. “Your main rival in these situations is a liquidation,” said one.

Debenhams’ owners, which include hedge funds Golden Tree and Silver Point along with Barclays and Bank of Ireland, are not thought to be interested in continued ownership of the group.

They took control via a “prepack” administration in early 2019 after acquiring the majority of Debenhams’ debt in a transaction that wiped out Frasers’ 29 per cent equity investment in the company.

Suppliers told the Financial Times that Debenhams had placed few orders for spring and summer stock, suggesting its owners did not expect to be running the company for much longer. “If you haven’t confirmed spring stock by now, the bottom line is you’re not going to get any,” said one.

Peter Cowgill, the 67-year-old Mancunian who has run JD Sports for more than a decade, has made opportunistic acquisitions before — buying Blacks Leisure and Milletts out of administration for £20m in 2012. Six years later, he made a bold attempt to enter the US market via the £400m acquisition of Finish Line.

But owning the department store chain would be a major departure for a group whose success — sales have risen almost eightfold over the past decade — has been built on a carefully curated product offering in sportswear and footwear.

Many expect that if JD were successful, it would trade Debenhams through the seasonal peak period before reviewing options and potentially closing more stores next year. Although rents have been cut and leases shortened, the group’s business rates burden is heavy and will return when the current Covid-19 waiver ends in April.

Greg Lawless, general retail analyst at Shore Capital, said that “as a best-in-class retailer”, JD would be able to operate Debenhams “much more efficiently and potentially harvest significant margin opportunities”.

However, he acknowledged that the execution risk was considerable, as evidenced by Frasers’ 2018 acquisition of rival House of Fraser, which Mr Ashley later hinted he regretted after admitting the chain’s problems were “nothing short of terminal”.

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