Mike Ashley's Frasers Group in last-minute talks to save Debenhams
Mike Ashley's Frasers Group may secure a deal to take control of Debenhams and has been holding last-minute talks this weekend to acquire the business in a deal that would value it at £200m and could save 12,000 jobs.
Debenhams has long been a target of Ashley but the struggling department store entered a liquidation process last week, a day after it was revealed that Sir Philip Green's Arcadia had collapsed into administration. Arcadia operates numerous concessions across the Debenhams chain and the two groups were seen as interdependent.
Prior to the collapse of Arcadia, Debenhams had been in exclusive rescue talks with JD Sports, which emerged as a surprise potential buyer after a sale process was triggered when Debenhams was placed into "light touch" administration during the first national lockdown.
JD pulled out of the talks when it was revealed that Arcadia was likely to be placed into administration and place further pressure on the already troubled department store.
Earlier in the sale process Frasers Group had expressed an interest in buying Debenhams but claimed to have been "frozen out" of the process by its advisers (Lazard had been handing the sale process while FRP Advisory was acting as administrator), a claim they denied.
However Frasers has re-engaged with Debenhams and is attempting to strike a deal that would give hope to the 12,000 staff in the chain who are set to lose their jobs when stores are scheduled to cease trading after Christmas. However a deal is far from certain and the value of the businesss would depend on how much stock is left.
Frasers Group finance director Chris Wootton, told The Sunday Times, that the negotiations were on a knife edge. “We hope to be able to save as many jobs as possible. However, we have found that Debenhams has been overly reliant on Arcadia for many years, and with the administration of Arcadia last week, as well as no end in sight to the outdated business rates regime which unduly punishes the likes of Debenhams, it may be a bridge too far,” he said.
Frasers Group already owns department store chain House of Fraser, which Ashley acquired out of administration in the summer of 2018 for £90m. It has long been his ambition to take control of Debenhams as well and it looked like his campaign had come to an end when rival JD Sports entered exclusive talks.
It was speculated, however, that Ashley would renew his interest after the events of last week. Ashley is said to have believed that Arcadia owner Sir Philip Green had blocked his bids to buy Debenhams, as the pair, who once had a friendly relationship, are no longer on good terms. Sir Philip is said to deny this but Arcadia is believed to have turned over around £100m across Debenhams stores via its brands that include Topshop, Topman, Burton, Miss Selfridge, Evans, Wallis and Dorothy Perkins.
Prior to Arcadia's collapse into administration, Ashley offered the business a £50m secured loan, which was declined without the parties entering into talks. Sources close to the companies dismissed the move a Ashley effectively trolling his rival, but Frasers has nonetheless let it be known that it would be interested in formally taking part in the Arcadia sales talks as well.
Debenhams, which currently operates 124 stores, also attracted interest from Marks & Spencer and Next for some of its stores while The Hut Group had been interested in its website, which is said to be the most attractive part of its business.
Should Ashley secure a deal to buy Debenhams, it would conclude a campaign that began in 2014 when he first took a stake in the listed business. A concerted attempt to take control began towards the end of 2018 and in the early part of 2019 when Ashley, who then held a near 30% stake, make numerous overtures, via loan offers and bids, but was rebuffed each time by its investors.
Its investors, led by Silver Point Capital, eventually put the business into administration in April 2019 and bought it straight back out again (having formed a consortium called Celine), prompting outrage in Ashley who called the move "a national outrage".
Celine negotiated a CVA deal with creditors but at the start of the first national lockdown put the business into administration again and subsequently began the latest round of sale talks.