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Is Mike Ashley set to save House of Fraser?

Lauretta Roberts
31 July 2018

Retail tycoon Mike Ashley, owner of the Sports Direct group, is reported to be in talks to mount a rescue bid for embattled department store House of Fraser as plans to launch its controversial CVA face delays.

Ashley, who already owns an 11% stake in House of Fraser, is said to be discussing with its banker Rothschild the possibility of a £50m injection of cash either via an equity purchase or loan.

The news emerges as it has been revealed that the House of Fraser CVA, which was voted through by creditors last month despite resistance from landlords, faces delays. Current owner Sanpower intended to offload a 51% stake in the business to fellow Chinese group C.banner, which would inject £70m in cash into the business. However it has emerged that this payment could be delayed by several months.

According to a letter sent to the retailer's bankers, and seen by Sky News, Sports Direct said it was "willing to structure a transaction on similar terms (subject to due diligence to confirm the level of investment/cash injection required)." The group also said it could offer to support the department store by assisting with warehousing and other areas of running the business.

The news will resurrect rumours that Ashley harbours a desire to merge House of Fraser with fellow department store chain Debenhams, which is facing its own challenges having last month issued another profits warning saying that trading in May and early June was "below plan".

Ashley has been steadily building up a stake in Debenhams and in March took his stake to 29.7%, which is just under the mandatory take-over offer threshold of 30%. He also owns a more that 27% stake in fashion retailer French Connection.

Industry watchers believe that Ashley would only make an offer to save the House of Fraser business if he could see a clear path towards a full acquisition of the business, which he had attempted to buy in 2014 before it was sold to Sanpower.

Under its CVA plans, put forward by new CEO Alex Williamson who joined  the company from Goodwood last year, House of Fraser intends to close more than half of its 59 stores, including its flagship on London's Oxford Street. It is understood that the business needs to secure new finance within the next four weeks to enable it to purchase more stock for the run-up to Christmas.

There are fears that if a refinancing deal can't be secured, although Sky News reports that other potential investors have been approached, the business could fall into administration putting 17,000 jobs at risk. The move would affect not only staff employed by House of Fraser but those employed by beauty and fashion brands with concessions in its stores. In its current form the planned CVA would lead to 6,000 job losses.

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