A Piece of Cake – Mike Ashley Chases Patisserie Valerie


We’ve into a compare and contrast story here in these Sceptre’d Isles. But first an incy-wincy bit of background. As you will recall, Tim’s being regaling us here with yummy accounts of the travails at Patisserie Valerie. You know, that chain of sweet delight that wasn’t what it seemed. But isn’t that just so true of those cakes you buy that on the outside appear just sumptuous, but when you bite into them they’re a great disappointment? Just ask Luke Johnson. He’s a reformed sugarholic.

Whether or not the chain ever broke even as Tim so nobly explained, even such a dullard as your sarky economist here can see that there are people queuing up at the outlets to get their sugar rush and cappuccino high. There’s one not a million miles from where we live, and we’ve been there in that spirit of scientific inquiry that requires real sacrifices. Yep, there’s people there. And cakes. And coffee.

There’s some value in the business, therefore, just not what was in those accounts. So we smiled when we read here in the Indy that Mike Ashley has a sweet tooth:

Sports Direct CEO Mike Ashley bids for Patisserie Valerie cafe chain Bakery chain went into administration in January after discovery of £40m hole in its finances, which it blamed on ‘potentially fraudulent’ accounting irregularities

Perhaps after running around saving the high street in one of those tracksuits he sells at Sports Direct, Mike likes the idea of stopping for a wee cuppa and cake. Each to their own, we say.

But then, strewth, hand slaps forehead, why hadn’t we remembered? We’re reminded of this:

HMV rescue deal to save nearly 1,500 jobs – but 27 stores will close

HMV has been bought out of administration by Canadian record chain Sunrise Records, thwarting Sports Direct owner Mike Ashley’s desire to add the entertainment chain to his retail empire.

The deal, headed by entrepreneur Doug Putman, will rescue 100 HMV stores and save almost 1,500 jobs. His interest in the chain was first reported by The Telegraph on Sunday.

In case you were asleep at the job or had sloped off to Valerie’s for a little tart, that Mike Ashley there sniffing around after HMV is the same Mike Ashley as is putting in that little bid for Valerie’s. The one and the same. What a coincidence. Mike likes records and fancy cakes. Who would have known?

We have it on good authority that Mike’s an entrepreneur, which is a fancy French word for someone who undertakes. No. not overtaking on the inside lane; someone who takes financial risks to make a profit.

Now you’ll not be surprised to know that starting a business from scratch is risky. We’ve heard scary tales about the number of start-ups that just don’t make it. Anyone who can make a go of it deserves their coffee and cake. Just don’t go getting Tim all fired up about this kind of thing. Never, ever, in his presence utter the magical word “scandium”. But we’re digressing here.

Mike knows a thing or two about making retail turn a profit. He sells lots of those tracksuits at Sports Direct. Then there’s those bust businesses: HMV and Patisserie Valerie. They’ve got some value even if its less than that in the books. The key to turning a profit, as Mike would say, is to pay less than you’re going to get back from your purchase. Get the business on the cheap and you’ve a good chance of making it payoff. However much of a dullard it is. And we don’t get much more dullard than HMV. And Valerie, apparently. These are the kinds of deals that yours truly likes. The no-brainer ones. All one needs is the dosh to do it. Sadly, we lack access to the few million needed to satiate our sweet tooth. Not so, Mike.

As of now, both companies are in administration. Bless their little pocket calculators, the administrators are seeking to recover any value in the business to return it to the creditors and investors who provided the money to get it going.

This is where the dismal science comes in. We’re looking at next best use here. Breaking up the business, selling off the bits and pieces and closing down the shops and surrendering the leases isn’t necessarily the best way to return those pennies in the pound that the creditors might expect. In these situations, sadly, the investors will most likely get nowt. Sorry, Luke. Selling the business as a going concern is likely to provide more pennies than the fire sale alternative.

But who’s going to be interested? Mike is. He knows the high street, he’s done well there and wants to get richer. He’s put in cheap bids for the businesses—or those parts that haven’t already been chopped off by the administrators—in the expectation that having got them at bargain basement prices, he’ll turn a profit. That was the plan for HMV. His offer was decidedly low ball. Very low ball. But better than breaking up HMV and selling the pieces as souvenirs.

Unfortunately for Mike, the administrators found another buyer. Two buyers for the same business! The administrators got an auction going. The price they’ll get when there’s two competing for the chance to make some dosh will be higher than when there’s one. And that’s what they managed for HMV.

Some Cannuck guy who loves vinyl.

Mike, who knows his stores, gritted his teeth and walked away. He stopped off at Valerie’s to have a coffee and cake as a consolation present and looked around. While we were not there, we’re sure his face broke out into a broad smile. He wasted no time. He went straight around to the offices of KPMG with a bunch of fancy cakes and grinned sweetly at them.

As the dour administrators at KPMG munch on his cakes and consider his offer and tout around for another Cannuck who’s got a sweet tooth, Mike is out there kicking a football around. If he’s as smart as he is rich, he’ll have put the squeeze on the administrators by putting a time-limited offer to them. Telling them they’ve got forty-eight hours to agree must have been sweet music to his ears.

The thing we don’t really know, though is: Does Mike prefer cakes to music?


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Jonathan Harston
Jonathan Harston

You’ve made me picture Mike Ashley as another Other Barry.

Tony Carden
Tony Carden

Tusk, tusk, would I ever do such a thing?