House of Fraser has new owners – within a day of being placed in administration.
On Friday, Ernst & Young were appointed administrators after House of Fraser announced that “discussions with interested investors and its main secured creditors have not concluded in a solvent solution”. That followed the collapse of a rescue plan from China’s C.banner International, parent of Hamleys, a week earlier.
Hours later it was announced that Mike Ashley’s Sports Direct had bought the struggling department store business for £90 million
The deal was achieved through what is known in the UK as a ‘pre-pack administration process’ where a company is put into administration before a new buyer can acquire the assets it wants and not be lumbered with liabilities such as pension schemes.
It leaves current majority shareholder, the Chinese company Nanjing Cenbest, which brokered the failed C.banner investment, with nothing.
With 17,000 employees in the US, the company’s collapse looked set to be the biggest in the UK retail sector since BHS. However through the short process all stores remained trading.
Ashley already owned 11 per cent of House of Fraser before the administrators were called in and by buying the company has achieved what UK observers describe as a long-held ambition to own a department store business.
“An acquisition of the 169-year-old retail business will see House of Fraser regain stability, certainty and financial strength,” CEO Alex Williamson said, announcing the administration.
“In the two weeks since the … C.Banner transaction ceased, the directors have brought forward a number of potential buyers and the group’s financial advisers have run a comprehensive M&A 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,” Williamson said.
Sports Direct’s immediate plans for the business are unclear, including whether it plans to proceed with terms of a Company Voluntary Agreement negotiated with creditors in June which would have seen 31 of House of Fraser’s 59 stores closed and 600 jobs culled.
Ashley has indicated he will convert some stores in Sports Directs and others into his Flannels brand.
Ashley owns 29 per cent of another UK department store chain, Debenhams, and has interests in Goals Soccer Centres and French Connection.