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London - Britain's biggest sporting goods retailer Sports Direct has proposed a share bonus award worth £65m ($108m) for its founder Mike Ashley that will pay out if the firm beats the profit targets of an existing staff bonus scheme.
Ashley, who holds a 62% stake in the company he founded in 1982, receives no salary or other bonus from Sports Direct, despite being a key figure in its success and generating free advertising for it through his ownership of English Premier League soccer club Newcastle United.
On Tuesday the firm proposed to grant Ashley 8 million ordinary shares, worth about £65m at its current share price of 823 pence, in recognition of his contribution.
The shares will vest in July 2018 if the firm achieves earnings before interest, tax, depreciation and amortisation (Ebitda) of £330m ($549m) for the year to April 2014 and £410m for 2015, as well as a net debt/Ebitda ratio of 1.5 times or less at the end of its 2015 fiscal year.
The targets for Ashley are tougher than those set for the firm's employee bonus scheme, which requires Sports Direct to hit full-year Ebitda of £310m and £360m for 2014 and 2015 respectively.
One analyst who did not wish to be named said Ashley's target of £330m was in line with 2014 consensus forecasts but that his 2015 target represented an upgrade.
"The outer year (2015) is more interesting. Consensus is £375m Ebitda, so this is £35m ahead of that," he told Reuters.
Shares in Sports Direct, up 88% on a year ago, were 1.7% higher to 823 pence in early trade on Tuesday.
"The company has already received support from its largest institutional shareholder, Odey Asset Management, who has confirmed that it intends to vote in favour of the resolution," Sports Direct chairperson Keith Hellawell said.
"The board believes that Mike is one of the outstanding retailers of his generation and that all shareholders benefit from his on-going commitment to Sports Direct."
Analysts at Espirito Santo noted that the net debt target within Ashley's bonus proposal also meant Sports Direct would not be able to buy British department store chain Debenhams for cash and remain within the target.
Sports Direct has not said it plans to buy Debenhams but is in talks to strike a partnership with the firm.
The proposal is the third attempt by Sports Direct's board to reward its founder. One previous proposal was knocked back by shareholders due to concerns over the related performance targets, and another failed to be put to a vote.
The new proposal will be put to shareholders at a meeting on April 4. Ashley will not vote his holding.
Sports Direct, which has over 600 sports stores in Europe, including 400 in the UK, grew rapidly during the economic downturn on demand for its value offers, supported by a mixture of acquisitions, expanding online sales and the demise of rivals like JJB Sports.
The firm's shares entered Britain's blue-chip FTSE 100 index in September.
