Heatons sale to Sports Direct: Court papers reveal bust-up before €48m deal
Sports Direct, the UK retail group owned by billionaire Mike Ashley, was locked in a bitter legal dispute with the owners of Irish retailer Heatons immediately prior to seeking competition approval last month to acquire the Irish group outright for €48m.
A High Court judge involved in the dispute said there are twists in the case "worthy of a Jeffery Archer novel" and that the two sides waged a "battle royal", with several rows on-going between them.
Sports Direct has owned a 50pc stake in Heatons for years and only last month said that it had marginally increased that to a majority stake and had engineered an agreement to buy the remainder.
It increased its stake by buying shares from Sandra Minor. It also entered into a conditional agreement with John O'Neill, Heatons' managing director, as well as Hugh Heaton, Mark Heaton and firms called Warrnambool and Katipo to buy the remainder of the shares in the Irish business that it doesn't already own. Warrnambool also owns five Sports Direct stores in Northern Ireland.
But the agreement was brought about despite a blistering legal row between the parties, with the Heatons shareholders having been collectively sued by Sports Direct in an action that began in summer last year.
Sports Direct had claimed that Heatons had entered into "numerous property transactions" without the consent of Sports Direct and contrary to a shareholder agreement it says demands that the prior written consent of 60pc of shareholders is required before various property transactions and developments are entered into.
Sports Direct also alleged that in April 2014, John O'Neill, Mark Heaton and Hugh Heaton purported to purchase Sandra Minor's shares in Warrnambool in an alleged breach of pre-emption agreements Sports Direct claims exist under a shareholders agreement. The defendants denied that shareholders in Warrnambool are bound by all of the terms of the relevant shareholder agreement.
The defendants also claimed that Sports Direct was conducting itself "in a manner calculated to damage the company (Heatons and Warrnambool) and that it is seeking to block transactions that are in the best interests of the company". Sports Direct denied this.
Last month - two weeks after Sports Direct made its acquisition plan public - High Court judge Max Barrett issued a ruling for the discovery of documents in the case, which is all but dead now in light of the agreement reached to sell the remaining stake in Heatons to Sports Direct.
"There are, in short, several rows on-going between the parties, all of them hard-fought," he said. "As part of this battle royal, two orders for discovery have been made to date. Given the level of antagonism between the parties, it is perhaps unsurprising that disputes have now arisen between them as to the adequacy of the discovery each has afforded the other pursuant to those orders."
Sports Direct argued that when the Heatons holding framework was being restructured in 2004, it was agreed that shareholders would be bound by a 1995 shareholder agreement. Sports Direct claimed that in late 2004 a deed of adherence was drafted, the parties to the contract included Mike Ashley and the defendants.
"However, in a twist worthy of a Jeffrey Archer novel, Sports Direct cannot at present locate a signed copy of the deed of adherence," noted Justice Barrett.
The defendants also denied that any agreement was reached that bound them to the 1995 shareholder agreement.