Sports Direct buys House of Fraser for £90m
Written by Peter Walker
Sports Direct has acquired all of House of Fraser's department stores in a £90 million cash rescue deal.
In a statement to the stock exchange, Mike Ashley's sportswear chain confirmed it had bought the retailer, following House of Fraser's administration announcement earlier this morning.
“The group has acquired all of the UK stores of House of Fraser, the House of Fraser brand and all of the stock in the business,” read the statement.
House of Fraser had stated that after discussions with several interested investors have not secured a rescue deal, it was appointing Ernst & Young as administrators.
The move put the department store chain’s 17,000 employee’s jobs in jeopardy - with more details to come as to how the new deal will impact staff.
Alex Williamson, chief executive of House of Fraser, said he was hopeful that the current negotiations will shortly be concluded.
“In the two weeks since the Cenbest and C.Banner transaction ceased, the directors have brought forward a number of potential buyers and the group’s financial advisors have run a comprehensive merger and acquisition process to identify and then develop other third party interest that has culminated in the senior secured creditors leading negotiations with parties at a critical pace,” he commented.
Chinese investment firm and Hamleys owner C.Banner had promised an investment of £70 million, which was conditional on the implementation of a company voluntary agreement (CVA). House of Fraser’s current majority owner, Nanjing Cenbest, had also signed a memorandum of understanding that C.banner would purchase 51 per cent stake in the department store after the CVA process was complete.
However, C.Banner withdrew in late July, just days after it said it would delay it until October due to the landlords’ legal action - initially filed on July 20 - intensifying House of Fraser’s need to secure investment. The move also came a day after credit ratings agency Moody’s said the business was in technical default on its loans.
Frank Slevin, chairman of House of Fraser, concluded: “This has been an extraordinarily challenging six months in which the business has delivered so many critical elements of the turnaround plan.
“Despite the very recent termination of the transaction between Cenbest and C.Banner, I am confident House of Fraser is close to securing its future,” he added.
Helen Dickinson, chief executive of the British Retail Consortium, called this a critical period for the retail industry, caused by a perfect storm of pressures including rising costs and new technology changing how people shop.
“How much more news like this will it take before the government acts to support retailers by cutting the business rates bill?”