Sports Direct ‘deal’ was no deal

Sports Direct billionaire Mike Ashley will not have to pay an investment banker £15 million over an alleged deal he made during a night of ‘power drinking’.

The 52-year-old businessman was sued by Jeffrey Blue who claimed the tycoon promised him the massive bonus if he could double the sport firm’s share price.

Mr Blue said under the terms of the deal he had to get the firm’s share price up to £8-per-share within three years – he achieved the feat in a single year.

Ashley regularly presided over drink-fuelled meetings and encouraged the laddish environment to get his managers to express themselves freely, the High Court heard.

Ashley said he was so drunk at the Horse and Groom pub near Sports Direct’s flagship store in Oxford Street on 24 January 2013 that he could barely remember anything.

He only ever received a one-off £1 million bonus from Ashley – said to have a personal fortune of £2.4 billion.

Ashley maintained throughout that he had no memory of making such a deal, and even if he had it would only ever have been a joke.

He pointed out that he wouldn’t make a deal based on share price, because even if it had shot up, it could have plummeted the next day and he would still have had to pay out.

Ashley said that improving share price was what MR Blue was paid £400,000-per-year to do anyway.

In his ruling today (weds), Mr Justice Leggat said: ‘In the course of a jocular conversation in a pub with four bankers Mr Ashley said he would pay Mr Blue £15 million if the Sports Direct share price, then trading at £4-per-share, reached £8-per-share.

‘Mr Blue expressed his agreement to that and everyone laughed – 13 months later the shares did reach £8-per-share.

‘No reasonable person in the Horse and Groom that night would have thought the offer to Mr Blue was serious and was intended to form a contract.

‘No one in the Horse and Groom including Mr Blue would have thought it was serious.

‘The fact that he did shows that the human capacity for wishful thinking knows no bounds.’

The night had been organised to entertain four bankers from Esprito Santo Investment Bank (ESIB) to develop a business relationship with them.

Mr Blue claimed he did not ensure there was a written version of the agreement because he believed the businessman was a ‘man of his word.’

He said it was only later that he learned Mr Ashley was a ‘man that cannot be trusted.’

In his evidence, he said: ‘These meetings were like no other senior management meeting I had every attended.’

‘It was effectively a lock-in with alcohol continuing to be served well beyond closing hours, and fish and chips or kebabs provided.’

Mr Blue described one such evening when Ashley challenged a junior member of staff to a drinking contest and downed 12 pints and chasers before vomiting in a fireplace.’

Other antics included Ashley buying bottle after bottle of £3,000 Richeboug red wine at Benares in Mayfair until it ran out before hitting the casinos with shareholders.

He once played a game of ‘spoof’ to resolve who should pay Merill Lynch’s legal fees.

The flamboyant businessman fiercely defended his unorthodox management style in the witness box, saying the purpose of the evening had been to ‘sell’ Sports Direct to the bankers.

He said he had even offered one of the ESIB bankers a job at his football club Newcastle Utd, adding: ‘He didn’t take me seriously because it was obviously just banter.’

Ashley said: ‘I wants to that meeting because I had to go to that meeting.

‘That kind of thing is like going to a school do for your kids. Absolutely horrendous.’

He complained that his mangers liked to ‘roll me out’ to impress potential clients and that the people he met were inevitably disappointed.

‘They’re expecting a bright person,’ he said.

‘I say don’t keep rolling me out unless you absolutely have to. The other side will not be as impressed as you think they are going to be – as you are not now.’

Describing the infamous spoofing session to determine who would pay Merrill Lynch’s legal fees for their handling of Sport’s Direct’s public float.

‘I had an opportunity to save Sports Direct £750,000 – I either had to pay it or I had to spoof for it.’

In the end, Ashley lost the game and had to pay the legal fees.

‘The city may laugh at me for the next 15 years but I could have saved Sports Direct £750,000 and I’d do it again in the morning.’

Mr Blue and Ashley met in 2006 when he was working for Merrill Lynch, and began working for Sports Direct via Aspiring Capital Management in October 2012.

His job was to improve Sports Direct’s relationship with ‘The City’ by providing corporate finance and brokerage services and advising on potential acquisitions.

Referring to the night of 24 December 2013, he said: ‘Mr Blue’s game plan was for us to have a drinking session and he made it clear that my role was to make it a fun night and sell myself to SDI plc as a potential client.

‘He said words to the effect that I was there to ‘broker the brokers’.

‘I can’t remember the details of the conversations that we had in the pub as it was a heavy night of drinking. I do recall there was a lot of banter and bravado, which was a mixture of drinking and me trying to build a rapport with the brokers as per Mr Blue’s game plan.’

Peter Tracey, one of the ESIB bankers on the night out, said: ‘I didn’t realise Mr Blue was taking him seriously – it was only after the pub that I realised he was taking him seriously.’

He added that in from 2010 onwards Sports Direct’s business model became increasingly viable as Britain became obsessed with sport in the run up to the Olympics.

The banker said there were multiple factors driving the boom in the company’s share price outside of Mr Blue’s control.

‘It’s clear from Sports Directs’ performance that this was a business that was absolutely motoring – it was making prodigious amounts of cash and the debt was steadily being hoed down.

‘There are many other factors – the macro climate and the attitude toward the sector itself.

‘Investors were looking to buy into the earnings of a business going forward and trying to get an idea of that.’

Although Sports Direct’s share prices did shoot up, they have since plummet, due in part to an expose on his warehouses that revealed hundreds of staff were working for less than the minimum wage.

A report by MPs later compared conditions in his company to that of a Victorian workhouse.

Ashley will not have to pay Mr Blue a penny.

His legal team is no seeking indemnity costs on the basis that Mr Blue aired a series of scandalous claims free from the risk of libel action through the court case.

David Cavendish, for Ashley, said: ‘Mr Blue put in a series of scandalous allegations for calculated advantage.

‘The courts shouldn’t put up with that sort of behavior and should show its displeasure through the costs process.’

He said that many of Mr Blue’s allegations had been widely reported in the ‘serious’ press and were intended to pressure Ashley in to settling to avoid damage to his reputation.

Justice Leggat will decide on costs at a later date.

Neither Ashley or Mr Blue were present at today’s hearing.
ENDS