After days of press comment, JJB Sports has finally broken its silence on the extraordinary loan its executive chairman, Sir David Jones CBE, took from the owner of its biggest rival, Sports Direct’s Mike Ashley.
Details of the loan, including interest rates and the option to convert the loan into shares in ANT, were made known to the Company’s executive directors and its financial and legal advisers earlier this year. They viewed the arrangement as a private one concerning Mr Ashley and Sir David and not one requiring public disclosure.
The Board is clear that the arrangement, that was initiated before Sir David joined the Company as a non-executive director, has not given and does not give rise to any conflict of interest. The Board has been informed by Sir David that he intends to repay the loan as soon as possible in order to avoid further distraction for the Company and its business. The Board considers the matter closed.
Er, did not require public disclosure? Maybe that is what advisers Lazard, Panmure Gordon, Herbert Smith and Deloitte have told JJB. But this little saga does not feel too far removed from the scandal that engulfed David Ross, the co-founder of Carphone Warehouse. He was forced to resign a handful of PLC directorships after belatedly disclosing that he had pledged shares in the company as security against personal loans.
Moreover, can the company really claim that the loan did not give rise to any conflict of interest? When was the last time you heard of the boss of one listed company being in hock the owner of its biggest rival? And remember this is the close knit world of sports retailing we are talking about.
The fact that he took the loan before joining the board of JJB as non-executive director in October 2007 in no way makes things better, as the company seems to think. In fact it is puzzling why the loan only came to light “earlier this year”.
Equally puzzling is why someone of Sir David’s standing – he was the man that masterminded the turnaround at Next after all – had to borrow cash from Mike Ashley rather than a more traditional lender. We seem to remember that credit was flowing pretty freely in 2007.
Of course, it is not surprising that the board of JJB considers the matter closed and are backing their man. After all they are trying to raise £50m to put the company back on an even keel and without Sir David at the helm would struggle to raise a fraction of that figure.
The Board expresses its unanimous support for Sir David and takes the opportunity to thank him for leading the Company through the successful disposal of the Group’s fitness clubs business, the CVA process and a bank refinancing in his first six months as Executive Chairman. The Board believes that he is the right person to lead the Company through the next phase of the Group’s restructuring and to turnaround its sports retail business.
Update:
Panmure Gordon would like to make clear that they are not a financial adviser to JJB Sports but their stockbroker. They would also like to clarify that they did not have any role in advising on the disclosure of the loan.
Related links:
JJB boss Sir David Jones plays dead bat on Mike Ashley’s £1.5m loan – Times
JJB’s Jones must give a full account of himself - Nils Pratley
JJB shares fall 25pc as row over £1.5m loan to chairman Sir David Jones escalates – Daily Telegraph