House of Fraser calls in administrators ahead of a potential sale to Mike Ashley

House of Fraser

House of Fraser has called in the administrators this morning as rescue talks failed to result in “a solvent solution” for the business, however Sports Direct owner Mike Ashley is said to be close to concluding a deal to acquire it.

Administrators Ernst & Young plan to keep all 59 of its stores trading while a buyer is sought but Sky News reports that Ashley could conclude a deal to buy it as early as this morning. Sky News’ city editor Mark Kleinman also reports that Philip Day, the retail tycoon and owner of Edinburgh Woollen Mill, has not yet given up hope of pulling off a deal.

“Significant progress has been made towards completing a sale of the group’s business and assets,” House of Fraser said in a statement. “The proposed administrators are expected to continue to progress those discussions with a view to concluding a transaction shortly after their appointment.”

Yesterday the business confirmed it had until 20 August at the latest to secure new finance and the chain’s future. It had been in intense discussions this week with three parties including Ashley, Day and turnaround experts Alteri Investors.

Day’s bid had reportedly sought to avoid an administration but his bid was said to expand on an earlier proposed CVA deal that included the closure of 31 stores. Ashley, who already owns an 11% stake in the business, had apparently been seeking a pre-pack deal (effectively buying the business as soon as it entered administration on pre-agreed terms enabling certain liabilities to be wiped out). Industry watchers deemed administration before a sale the most likely outcome.

The business had been under severe pressure to find a new investor after Chinese group C.banner pulled out of a deal last month to acquired a 51% stake from current owner Nanjing Cenbest (part of Sanpower) and to invest a further £70m in the business.

House of Fraser CEO Alex Williamson, who joined the business last year, said he was “hopeful” that a deal to buy it would be concluded shortly. “An acquisition of the 169-year-old retail business will see House of Fraser regain stability, certainty and financial strength,” he said.

“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 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 added.

Chairman Frank Slevin added: “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.”