Mike Ashley’s deal-making faces investor scrutiny

In the tumultuous year since Mike Ashley returned as chief executive of Sports Direct, the UK retail tycoon has stepped up his deal-making, snapping up everything from a lingerie brand to US sellers of outdoor gear.

Mike Ashley’s deal-making faces investor scrutiny

At the company’s annual meeting today, investors will get their say on a strategy that some argue is better suited to a hedge fund than a publicly traded sporting-goods retailer. Chairman, Keith Hellawell, has pledged to stand down, if a majority of independent shareholders oppose his re-election for a second year, and advisory groups and fund managers are urging them to do so.

“The chair should be challenging, and testing, these deals to ensure they are more likely than not to succeed,” said Paul Lee, head of corporate governance at Aberdeen Asset Management, which owns Sports Direct shares.

“It is impossible for investors to know what Ashley is going to do next and, frankly, the way he himself tells the story, he doesn’t always know what he will do next,” he said.

Giving a thumbs-down to Mr Hellawell is one of the few ways investors can vent their frustration over a lack of internal scrutiny of Mr Ashley’s actions.

The sporting-goods company manages a growing portfolio of stakes in other retailers, but its founder and majority shareholder has yet to detail an overarching strategy, at a time when his after-work activities are grabbing the spotlight.

A London court, in July, rejected a banker’s claim that Ashley owed him millions of pounds in a bonus.

There are few common threads to Ashley’s myriad investments. Some of the deals may be aimed at broadening the reach of Sports Direct’s brands, such as Slazenger and Donnay.

Mr Ashley used a 21% position in department-store, Debenhams, to pressure management into opening Sports Direct concessions in seven of its stores.

Others, such as his 29.6% holding in US sporting-goods seller, Finish Line, and a $101m (€84.9m) acquisition of Bob’s Stores and Eastern Mountain Sports, are opportunistic swoops on floundering companies.

In March, Ashley backed a €65.5m buyout of lingerie brand, Agent Provocateur, a month after opening a position in struggling fashion retailer, French Connection.

Those deals were followed, in July, by a 25.7% stake in UK computer game retailer, Game Digital, days after the shares hit an all-time low.

“The group is focused on opportunities that will deliver benefits for our customers, broaden or enhance our commercial relationships or retail channels, selectively grow our market share and/or further diversify our operations,” Sports Direct said in its annual report.

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