Mike Ashley will sever all ties with Rangers after agreeing a deal to sell his shares in the club.

The Sports Direct and Newcastle United owner ripped up the toxic retail contract on Wednesday which saw the Ibrox outfit receive just seven pence from each pound spent on club merchandise.

A renegotiation of the previous seven-year arrangement led to both parties concluding a new 12-month tie-up likely to net Rangers an additional £5million a year via a huge increase in shirt sales.

Mike Ashley will sever all ties with Rangers after agreeing a deal to sell his shares

And, as part of the deal, Sportsmail understands Ashley will sell his 8.92-per-cent stake in Rangers to supporters’ groups and an unnamed overseas investor.

Ibrox chairman Dave King was tight-lipped on the future of Ashley’s stake but conceded a long-running and acrimonious joint venture is close to a final parting of the ways.

‘I can’t talk about it but I would expect an announcement on that soon,’ he said.

‘Mike Ashley’s shareholding in the club was linked to an integrated retail deal.

‘So I would imagine he is probably less interested in the need to have a shareholding in the club at this point in time.’

The Sports Direct and Newcastle owner ripped up the toxic retail contract on Wednesday

Expressing ‘relief’ at the new deal, King expects it to stabilise Rangers’ fortunes following prolonged financial turmoil.

With Ashley appearing to be out of the picture, the last remaining obstacle to a rights issue is also effectively gone.

The board are now likely to call an EGM to push through plans to raise £16m to pay off loans from King and shareholders Douglas Park, George Letham and George Taylor.

‘One of the priorities for us over the last few years — the biggest if you ignore getting back to the top flight and into Europe — was the resolution of the retail deal,’ said King.

‘It has been by far the most significant and challenging. Myself and (company secretary) James Blair have been working on this for two years.

‘It has been very time intensive. I’ve spent more time on Rangers litigation over the last two years than I have on my own businesses. Much more.

‘It’s been a monumental effort but it was so critical to the club we got something sorted out.’

Rangers, meanwhile, have lodged an improved third bid for Norwich City midfielder Graham Dorrans.

The Canaries want £1.5m for the Scotland cap but are willing to sell for the right offer.