Opinion: Mike Ashley’s Patisserie Valerie U-turn is part of an odd recipe

The controversial retail entrepreneur, whose rate of stakebuilding and acquisitions has reached fever pitch in recent months, made an offer to acquire upmarket bakery chain Patisserie Valerie out of administration, before retracting the bid just two days later last week.

It is understood that Ashley tabled a £15m offer for the business, but was told the bid was too low by as much as £2m – a sum which seems like peanuts for a man who shelled out £90m to acquire House of Fraser in August.

What does Ashley’s erratic behaviour say about the method behind the madness – or lack thereof – of his latest spate of acquisitions?

According to the Financial Times, Sports Direct’s deputy chief financial officer Chris Wootton wrote to Patisserie Valerie’s administrator KPMG to say the retailer had “not been allowed access to a data room, any financial information or meetings with management” despite its “serious and substantial offer” to acquire the business.

As a result, Sports Direct abandoned its interest in the business just two days after announcing an offer.

The rapid u-turn begs two central questions.

First, what was Ashley doing publicly tabling a bid for Patisserie Valerie in the first place before he had done his due diligence on the state of the business?

And, perhaps more worryingly for Sports Direct shareholders, what does Ashley’s erratic behaviour say about the method behind the madness – or lack thereof – of his latest spate of acquisitions?

Spending spree

Patisserie Valerie about-turn aside, Ashley has bought House of Fraser, Evans Cycles and Sofa.com, considered acquiring HMV and strong-armed the ousting of Debenhams chairman Ian Cheshire and chief executive Sergio Bucher from the department store group’s board in the past six months alone. 

And he has done it all without giving Sports Direct shareholders the slightest inkling of what all these moves mean for his wider business strategy.

It’s a trajectory which has put Ashley’s standing as a savvy businessman in direct opposition to his self-confessed proclivity for a flutter, and raised the question of whether he has a masterplan or just likes a gamble.

It will take a while for the dust to settle on Ashley’s flurry of deals, but Sports Direct’s shareholders have made their displeasure known in the meantime.

The retailer’s share price fell from 275.3p on the morning of Friday, February 8, before the retailer unveiled its bid for Pattiserie Valerie, to 266.3p on the morning of Monday, February 11, after the offer had been retracted, suggesting bewilderment among shareholders about what Ashley’s game plan is.

Egg on his face?

To damn with faint praise, Ashley’s change of mind on Pat Val does give some indication that he has learnt the lesson to not throw good money after bad with ill-thought-through acquisitions – Newcastle United FC being an obvious one.

The entrepreneur admitted to not doing due diligence before his purchase of the football club, and paying a heavy price on players signed before he took ownership as a result.

With that in mind, backpedalling a hastily put together Patisserie Valerie bid could be seen as a step in the right direction – but whether it’s enough to put to bed shareholders’ concerns about Ashley’s wider business strategy is another question.

As the majority shareholder of Sports Direct, Ashley is not beholden to answer to irate stakeholders in the way that other chief executives are

Indeed, odd blip aside, the retailer’s share price has had a consistent downward trajectory since its acquisition of House of Fraser was unveiled on August 10 last year, indicating that Sports Direct’s stakeholders are sceptical about whether Ashley is executing a robust business strategy through the blizzard of deals.

As the majority shareholder of Sports Direct, Ashley is not beholden to answer to irate stakeholders in the way that other chief executives are.

However, for those whose patience is wearing thin and are looking for an excuse to ditch their stake, Ashley’s bewildering and botched Patisserie Valerie deal might just be the icing on the cake.