Billionaire Mike Ashley's Sports Direct International made a £43 million (€55 million) bet on a recovery in Tesco's share price, days after the biggest UK grocer said it overstated its profit forecast.

Sports Direct, Britain's largest sports-goods retailer, said today that it took out an option over 23 million Tesco shares, or the equivalent 0.28 per cent of the company's share capital, under an agreement with Goldman Sachs International.

“The investment reflects Sports Direct’s growing relationship with Tesco and belief in Tesco’s long-term future,” Sports Direct said in a statement today.

Tesco shares fell to the lowest in more than a decade this week after the supermarket company suspended four executives and said it had discovered that first-half profits had been overstated by £250 million.

Sports Direct said its maximum exposure under the agreement will be limited to £43 million.

It’s not the first time that Ashley’s company has made a wager on a UK retailer.

In January, it took a bet on the share price of department-store operator Debenhams, using a similar option agreement.

Sports Direct had been in discussions with Tesco to take space at some of its largest superstores which are undergoing refurbishment, reducing the amount of space used for food and bringing in outside retailers and cafes and restaurants.

Bloomberg