Mike Ashley's Sports Direct buys House of Fraser out of administration for £90 million
Tracksuit tycoon Mike Ashley's Sports Direct chain has bought House of Fraser out of administration for £90 million.
The department store chain, including Beatties in Wolverhampton, went into administration this morning and is understood to have been bought as part of a so-called 'pre-pack' deal.
Sports Direct says it has bought all of the UK stores, its brand and all its stock. That includes all the stores that had been set for closure this Christmas, under a previous rescue plan that would have sacrificed 31 of House of Fraser's 59 stores to save the rest of the business.
IBeatties' 280 staff, and nearly 16,000 more at branches up and down the country, are now waiting to discover what Mr Ashley has planned for them after declaring his ambition to "transform House of Fraser in the Harrods of the high street".
He said Sports Direct would try and keep as "many stores open as possible" and aimed to
In a brief statement yesterday, Mr Ashley said: “This is a massive step forward and further enhances our strategy of elevation across the Group. This will benefit both House of Fraser and Flannels in the luxury sector. We will do our best to keep as many stores open as possible.
"It is vital that we restore the right level of ongoing relationships with the luxury brands. Our deal was conservative, consistent and simple. My ambition is to transform House of Fraser into Harrods of the High Street.”
Half House of Fraser's stores, including Beatties in Wolverhampton, Rackhams in Birmingham and those in Telford and Shrewsbury had faced closure under a previous rescue plan but not until after Christmas.
Trading as normal
House of Fraser assured that its offices and stores will continue trading as normal for the time being. Stores were delaying opening until 11am, however.
The staff have been informed that they will be transferred over from House of Fraser to Sports Direct.
The deal was struck through a pre-pack administration process, where a company is put into administration before a new buyer cherry picks the best assets.
The tycoon beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill.
It is understood that Mr Day's proposal was in excess of £100 million, would have avoided an administration and included House of Fraser's pension scheme.
However, accountancy giant EY, which was overseeing the process, opted for Mr Ashley's offer.
Sources said that Mr Ashley will now begin the process of turning some House of Fraser stores into Sports Direct outlets and rebrand others under the Flannels fascia.
Prior to its collapse, Mr Ashley had held an 11% stake in the department store chain.
The deal will see the Newcastle United owner tighten his grip over the British high street, adding to his sports retailing and "premium fashion" empire.
The billionaire has also built up stakes in rivals such as Debenhams, Goals Soccer Centres and French Connection.
House of Fraser was plunged into crisis last week after C.banner, the Chinese owner of Hamleys, pulled its investment into the troubled retail chain.
C.banner was planning to buy a 51% stake in House of Fraser and plough £70 million into the ailing retailer, but then scrapped the move.
Like other retailers, House of Fraser has been stung by soaring costs and falling consumer spending power.
The company saw its business rates bills rise £3.99 million to £30.24 million this year following a Government revaluation, according to research group Altus.
Richard Lim, of Retail Economics, said: "The combination of rapidly rising costs against a backdrop of seismic shifts in the way we all shop is pushing traditional business models to the brink.
"The race is on to pivot business structures fast enough to be fit-for-purpose in today's digital world.
Criticism has also been levelled at House of Fraser's former Chinese owner, Yuan Yafei's Sanpower
"Individual circumstances need to be accounted for. The demise of House of Fraser in many ways has been the result of poor leadership, paralysis in innovation and crippling levels of debt," Mr Lim added.
EY said Alan Hudson, Hunter Kelly, Colin Dempster and Craig Lewis from from its restructuring team were appointed this morning as joint administrators to House of Fraser.
In a statement, EY said: "It has been well documented that since the withdrawal of the proposed Cenbest and C.Banner investment transaction House of Fraser has been in a race against time to secure sufficient funding to secure its future.
"Since then the directors, representatives of the senior creditors and their respective advisors have been speaking with a number of parties in order to secure a solution. However, after exploring a range of options, it became clear that this would not be possible to achieve as a solvent solution and as such House of Fraser filed for insolvency protection this morning.
"Shortly after our appointment, the administrators are pleased to confirm that they completed a sale of substantially all of the group’s business and assets to the Sports Direct group."
EY's Alan Hudson said: “We have worked very closely with management, its advisors and creditors in recent weeks and are pleased that we have been able to successfully conclude a sale of the business in short timescales which preserves as many of the jobs of House of Frasers employees as possible. It was a challenging transaction to achieve in such a short period of time which will ensure continuity of the business and preserve the goodwill.
"We hope that this will give the business the stable financial platform that it requires to flourish in the current retail environment."