Sports Direct has agreed to buy the House of Fraser department store chain for £90m. News broke earlier that House of Fraser called in administrators putting more than 17,000 jobs at risk, as the firm went into administration after talks between the retailer and its creditors failed to reach an agreement.
Administrators EY were called into the department store chain with House of Fraser issuing a statement saying that talks with investors and creditors had “not concluded in a solvent solution”.
EY have confirmed that the business would continue trading, including all stores and offices, while they attempt to complete a sale.
All of its 59 shops were set to open as usual on Friday, including the 31 that had already been marked for closure.
House of Fraser began trading 169 years ago and employs 17,500 people, including 11,500 concession staff.
Sports Direct said in a statement: “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.”
Analysis: retail expert Dr Gordon Fletcher at University of Salford
For a 169 year old retailer with a reputation for stability it has been a fast moving week for House of Fraser. The last 48 hours has seen the future of the brand hang in the balance as decisions in the boardroom have put jobs and pensions in doubt.
With a £40 million hole in its finances that needed to be filled by the 20th August an urgent solution was required. After rejecting offers from Mike Ashley’s Sports Direct and Philip Day’s Edinburgh Woollen Mills groups as well as bailout specialist Alteri yesterday, House of Fraser was faced with no other solution and went into administration this morning.
Now in the hands of its administrators, Mike Ashley has again made an offer to takeover over the retailer, and that offer of £90m has now been accepted.
While this could be seen as indecision from House of Fraser’s board, it makes good business sense for Ashley. In administration, Ashley will be able to choose which parts of House of Fraser he wants and those parts he does not.
This almost certainly will leave at least part of the pension fund in the hands of the Pension Protection Fund as well as the continued prospect of job losses but helps to keep the doors open at some House of Fraser locations including the iconic former Kendal’s site on Deansgate, Manchester. That is in a prime location and Ashley seems to want upmarket and inner-city locations.
A takeover will see House of Fraser become part of a group that includes Sports Direct and 30% of Debenhams. The advantages brought by the warehouses and logistics already managed by this group will be an important key in the recovery of the House of Fraser’s fortunes. So House of Fraser may well survive but it might look a bit different under the new regime!