Mike Ashley, the founder of Sports Direct, promised to pay an investment banker £15m if he could double the clothing chain’s share price in three years, according to reports.
The billionaire is allegedly being sued over the offer to Jeff Blue, a former Merrill Lynch banker, made during drinks at a London pub in 2013, according to The Times, which claims to have seen court documents.
Ashley is said to have agreed to pay Blue if he managed to raise the company’s share price from £4 to £8. Such a feat would make Ashley considerably richer because he owns more than half of Sports Direct.
In Blue’s account of the agreement made at the Coach and Horses pub on Great Portland Street, Ashley reportedly said: “What should I do to incentivise Jeff? If he can get the stock to £8 per share why should I give a fuck how much I have to pay him I will have made so much money it doesn’t matter.” Ashley contests this account.
Ashley initially offered £10m, but when Blue said a share price of £8 was a “high target” he raised it to £15m, the document stated.
Three bankers from the investment bank Espirito Santo also reportedly attended the meeting, with one saying that a fee of £20m would have been appropriate.
After several institutional investors including Aviva and Standard Life bought shares in Sports Direct between March 2013 and March 2014, the company’s shares closed at 808.5p on 25 February 2014, which should have triggered the £15m payment.
Ashley reportedly said in the court documents that “a considerable amount of alcohol” was drunk that night but that any conversation was just “banter”. He denied that any agreement was made.
The banker is said to be suing Ashley for £14m. The Sports Direct founder paid Blue £1m in May 2014, but said it was a reward for his help in getting investors to approve Ashley’s inclusion in a controversial £180m share scheme for the retailer’s staff. Blue had been head of mergers and acquisitions for Sports Direct, but left in February 2015.
Sports Direct declined to comment. Blue and Ashley could not be contacted.
Since the Guardian published an investigation into pay rates and working practices at the retailer’s warehouse in Derbyshire, Sports Direct shares have fallen by more than 30%. The stock closed down 8% at 471p on Friday after the company issued a profit warning.
Sports Direct said profits would be as much as £40m lower than expected following “a deterioration of trading conditions on the high street and a continuation of the unseasonal weather over the key Christmas period”.
Jonathan Pritchard, an analyst at Peel Hunt, said that “some mud from press articles/documentaries may have stuck to the brand”.
