EY appointed to House of Fraser administration
Embattled department store House of Fraser, which called in EY as administrators earlier today, has been sold for £90m to Sports Direct International in a deal which sees Mike Ashley's company acquire all its UK stores, the brand and all of the stock in the business
10 Aug 2018
The move follows House of Fraser's announcement it had appointed EY as administrators, after the embattled high street retailer announced that its recent discussions with interested investors and its main secured creditors have not concluded in a solvent solution, placing some 17,000 jobs at risk.
In a statement to the Luxembourg stock exchange early on 10 August, ahead of an application to appoint EY, the company said: ‘Significant progress has been made towards completing a sale of the group’s business and assets. The proposed administrators are expected to continue to progress those discussions with a view to concluding a transaction shortly after their appointment.
‘The proposed administrators have confirmed that the business will continue trading, including all stores and offices, while they seek to complete a sale. All stores will be open for business as usual.’
In June House of Fraser filed for a company voluntary arrangement (CVA), with Will Wright and Rob Croxen of KPMG appointed as nominees, and announced plans to close half of its stores, affecting 6,000 jobs. It also sought to reduce rents on its remaining stores, a move which was initially opposed by a group of its landlords who subsequently withdrew their legal challenge to the arrangements. The CVA terms were a condition of a proposed agreement for Chinese fashion company C.banner International Holdings Ltd to acquire a 51% stake in House of Fraser Group Ltd and introduce ‘significant’ new capital to the company, which has been hard hit by the move to online sales. However, C.banner withdrew its £70m offer, leaving House of Fraser struggling to avoid insolvency. Alex Williamson, chief executive of House of Fraser, said: ‘We are hopeful that the current negotiations will shortly be concluded. An acquisition of the 169-year-old retail business will see House of Fraser regain stability, certainty and financial strength.
‘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 advisors 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.’
There have been reports that sportswear retailer Mike Ashley, who has a 11% stake, might be interested but no comment has been made publicly. Philip Day, owner of Edinburgh Woollen Mill, Peacocks and Austin Reed, has also been named as a possible rescuer, as have Alteri Investors and Hilco which specialise in buying up troubled firms with a view to turning them around for a profit. Frank Slevin, chairman of House of Fraser, said: ‘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.’
The group has annual sales of £1.2bn and employs approximately 5,000 House of Fraser employees as well as 12,500 ‘concession colleagues’. Currently all 59 shops are set to open as usual on Friday, including the 31 that have already been earmarked for closure, but the firm’s website was offline in the early morning, displaying the statement ‘We’re currently working hard to make some improvements to the website’.
Report by Pat Sweet