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House of Fraser bought by Sports Direct for £90m House of Fraser bought by Sports Direct for £90m
(35 minutes later)
Mike Ashley's Sports Direct has agreed to buy the House of Fraser department store chain for £90m.Mike Ashley's Sports Direct has agreed to buy the House of Fraser department store chain for £90m.
The deal was announced just hours after the 169 year-old chain went into administration when talks with its creditors failed to reach an agreement. The deal was announced just hours after the 169-year-old chain went into administration when talks with its creditors failed to reach an agreement.
Its 59 shops were expected to open on Friday, including the 31 that had already been marked for closure. Mr Ashley said his plan was to turn the 59-store chain in to the "Harrods of the High Street".
It employs 16,000, 5,900 directly and 10,100 in concessions. Administrators said jobs could be "preserved".It employs 16,000, 5,900 directly and 10,100 in concessions. Administrators said jobs could be "preserved".
While some stores did not open on time on Friday, initial problems with the website were resolved. There were reports, though, that gift cards were not being accepted.
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."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."
Mike Ashley already held an 11% stake in the department store chain and it was not clear what his plans were but they could include rebranding some stores as Sports Direct. Sports Direct already held an 11% stake in the department store chain, which had been intending to close 31 shops under a now-abandoned restructuring plan.
House of Fraser's administrators, from accountants EY, said the retailer had been in "a race against time to secure sufficient funding to secure its future" ever since the Chinese firm C.banner pulled out of a rescue deal earlier this month. House of Fraser's administrators, from accountants EY, said the department store chain had been in "a race against time to secure sufficient funding to secure its future" ever since the Chinese firm C.banner pulled out of a rescue deal earlier this month.
Alan Hudson, one of the four administrators from EY, said the Sports Direct deal "preserves as many of the jobs of House of Fraser's employees as possible". What does this mean for jobs?
Before Friday's deal was announced, 6,000 roles were to have been lost.
Alan Hudson, one of the four administrators from accountants EY, said the Sports Direct deal "preserves as many of the jobs of House of Fraser's employees as possible".
"We hope that this [deal] will give the business the stable financial platform that it requires to flourish in the current retail environment"."We hope that this [deal] will give the business the stable financial platform that it requires to flourish in the current retail environment".
But union officials at Unite said staff were entering "a period of great uncertainty and worry".But union officials at Unite said staff were entering "a period of great uncertainty and worry".
Before Friday's deal was announced, 6,000 roles were to have been lost in the restructuring plan which included the store closures. Unite regional officer Scott Lennon said: "Sports Direct is a leopard that has not changed its spots and we hope that its poor record on pay and employment practices are not transferred to the House of Fraser."
While some stores did not open on time on Friday, initial problems with the website were resolved. There were reports, though, that gift cards were not being accepted. Who is Mike Ashley?
On Thursday, House of Fraser had indicated time was running out whens it wanted to secure financing by 20 August. Mr Ashley founded the 750-strong sports fashion chain Sports Direct in 1982. Among the brands it owns are Slazenger, Karrimor, and the sports retailer Lillywhites. It has also encountered controversy. A report by the Business, Innovation and Skills committee in 2016 concluded that the company did not treat its workers like humans, but Sports Direct said its policy was to treat all people with respect.
This is the date when payments were due to concessions inside the House of Fraser stores. He also has a varied portfolio of investments, including in department store Debenhams and the retailer French Connection. He also owns the lingerie chain Agent Provocateur, as well as the clothing chain Flannels, which sells brands such as Burberry London, Fendi and Sophia Webster.
Mr Ashley is also the owner of Newcastle United, although he attempted to sell the football club earlier this year.
What went wrong?
Chinese firm C.banner had been poised to invest in the store after it agreed a Company Voluntary Arrangement (CVA) with its creditors. This would have closed 31 stores and put 6,000 jobs at risk. But it could not raise the financing, leaving House of Fraser seeking new investment.
On Thursday, House of Fraser had indicated time was running out when it said it wanted to secure financing by 20 August. This was the date when concessions in the stores were scheduled to be paid.
As well as problems with its owners, the chain had too many stores, was slow to develop its internet shopping capability and failed to entice enough shoppers.
What does it mean for stores and shoppers?
More may stay open. Mr Ashley said: "We will do our best to keep as many stores open as possible."
"My ambition is to transform House of Fraser into Harrods of the High Street," he said, indicating a move upmarket.
"This is a massive step forward and further enhances our strategy of elevation across the group. This will benefit both House of Fraser and Flannels in the luxury sector," he added.
There had been speculation he might take the opportunity to expand the Sports Direct chain, which he has previously said he wants to transform into "the Selfridges of sport".
Analysts said he would need to spend more money. Sofie Willmott, senior retail analyst at GlobalData, said: "To give House of Fraser the best chance of survival, Sports Direct and its owner Mike Ashley must make drastic changes to both its product proposition and store environment to entice shoppers back."
Kate Hardcastle, from the retail consultancy Insight with Passion, told the BBC a move downmarket was more likely.
"This is a big move and I'm sure lots of people will be breathing a slight sigh of relief that the name House of Fraser isn't disappearing from the High Street altogether," she said.
"However, I can't imagine that the business or indeed its offer are going to be similar to that people know or recognise as House of Fraser - this is someone who deals very much in the discount market."
What does it mean for suppliers?
House of Fraser has two main types of relationships with its suppliers: wholesalers, who are paid in advance for their stock or concessions, which are on a payment schedule when items are sold.
Nigel Lugg, group executive chairman of Prominent Europe, which supplies Chester Barrie menswear to House of Fraser, said it was "good news" that the business had been saved.Nigel Lugg, group executive chairman of Prominent Europe, which supplies Chester Barrie menswear to House of Fraser, said it was "good news" that the business had been saved.
But, he said, suppliers will have hoped the business would avoid administration so they could be paid in full. But, he said, suppliers would have hoped the business would avoid administration, so they could be paid in full.
Suppliers
"I can't see the suppliers getting a lot of money out of the system," Mr Lugg told the BBC, adding suppliers often received 2p to 3p in the pound in cases of administration."I can't see the suppliers getting a lot of money out of the system," Mr Lugg told the BBC, adding suppliers often received 2p to 3p in the pound in cases of administration.
His business would be fine but, he said, "it could impact into other UK suppliers".His business would be fine but, he said, "it could impact into other UK suppliers".
"There is a lot of money trapped in the system," Mr Lugg said."There is a lot of money trapped in the system," Mr Lugg said.
House of Fraser has two main types of relationships with its suppliers: wholesalers who are paid in advance for their stock or concessions which are on a payment schedule when items are sold. Mr Ashley referred to some suppliers when he announced the deal. He said: "It is vital that we restore the right level of ongoing relationships with the luxury brands."
'Spend more money'
Attention was turning to Mr Ashley's plans for the stores. He has said that he wants to turn his Sports Direct fashion chain, which he founded in 1982, into "the Selfridges of sport".
As well as 750 Sports Direct stores, Mr Ashley has investments in Debenhams and French Connection, and he also owns the clothing chain Flannels.
He will need to spend more money on House of Fraser if it is to thrive, one analyst said.
Sofie Willmott, senior retail analyst at GlobalData, said: "To give House of Fraser the best chance of survival, Sports Direct and its owner Mike Ashley must make drastic changes to both its product proposition and store environment to entice shoppers back".
She suggested Mr Ashley could take House of Fraser more upmarket by putting in some of his existing brands such as Agent Provocateur and Flannels, which sells brands like Burberry London, Fendi and Sophia Webster.
'Relief'
But, another analyst said, House of Fraser was more likely to become more downmarket.
Kate Hardcastle from the retail consultancy Insight with Passion, told the BBC: "This is a big move and I'm sure lots of people will be breathing a slight sigh of relief that the name House of Fraser isn't disappearing from the high street altogether, however, I can't imagine that the business or indeed its offer are going to be similar to that people know or recognise as House of Fraser - this is someone who deals very much in the discount market."
Other contenders to take over House of Fraser had included Mike Ashley's retail rival Philip Day, who owns the Edinburgh Woollen Mill chain, Jaeger and Austin Reed.
The administrators at EY confirmed that "a number of parties" had been spoken to since C.banner walked away.
C.banner had been poised to invest in House of Fraser after it agreed a Company Voluntary Arrangement (CVA) with its creditors, which would have closed 31 stores and put 6,000 jobs at risk. But it could not raise the financing, leaving House of Fraser seeking new investment.
The administrators said they were appointed after it was not possible to achieve "a solvent solution" and House of Fraser filed for insolvency protection on Friday morning.