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House of Fraser bought by Mike Ashley's Sports Direct for £90m House of Fraser bought by Mike Ashley's Sports Direct for £90m
(about 1 hour later)
The government has hinted the UK could take the lead by imposing an “Amazon tax” on online sales as an escalating high street crisis saw House of Fraser collapse into administration. The government has hinted it could impose an “Amazon tax” on online sales as an escalating high street crisis saw House of Fraser collapse into administration.
The stricken department store chain, shorn of its debts and pension fund, was immediately snapped up by Sports Direct, the sportswear chain controlled by Mike Ashley, in a £90m rescue deal. The deal secures 17,000 jobs for the time being. The stricken department store chain, shorn of its debts and pension fund, was immediately snapped up by Sports Direct, the sportswear chain controlled by Mike Ashley, in a £90m rescue deal. The deal will protect 16,000 jobs for the time being.
Speaking on Friday, the chancellor, Philip Hammond said he would consider “temporary tax measures” if the UK could not persuade other countries to find a way of levelling the playing field between the internet giants. Speaking on Friday, the chancellor, Philip Hammond, said he would consider “temporary tax measures” if the UK could not persuade other countries to find a way of levelling the playing field between the internet giants.
“We want to ensure that the high street remains resilient, and we also make sure that taxation is fair between business doing business the traditional way, and those doing business online,” said Hammond. “We may have to look at temporary tax measures to rebalance the playing field until we can get international agreements sorted out.”“We want to ensure that the high street remains resilient, and we also make sure that taxation is fair between business doing business the traditional way, and those doing business online,” said Hammond. “We may have to look at temporary tax measures to rebalance the playing field until we can get international agreements sorted out.”
There have been a run of retail failures this year with Toys R Us and Maplin among the chains that have disappeared from the high street taking nearly 30,000 jobs with them. Household names such as New Look, Mothercare, Marks & Spencer and Carpetright have also announced plans to close hundreds of stores as weak consumer confidence is compounded by the online shopping boom. Traditional retailers face much higher tax charges than their online rivals. The business rates bill for House of Fraser’s flagship store on London’s Oxford Street – just one of 59 outlets – has soared £1.7m to £4.6m this year, according to property adviser Altus Group.
On Friday Sports Direct confirmed it had bought the retailer for £90m in cash with Ashley, whose other investments include Newcastle United, promising to turn the struggling chain into “the Harrods of the high street” and pledged to keep as many stores open as possible. By comparison, Amazon UK’s annual corporation tax bill – revealed last week – was only £4.6m. That was a reduction on the previous year, even though Amazon’s UK profits had increased from £24m to £72m. Amazon was also able to defer a chunk of the total bill, so only had to pay £1.7m.
There have been a run of high street failures and closures this year, taking some 30,000 retail jobs with them. Toys R Us, Poundworld and Maplin have collapsed, while New Look, Mothercare, Marks & Spencer and Carpetright have announced plans to close hundreds of stores as weak consumer confidence is compounded by the online shopping boom.
On Friday, Sports Direct confirmed it had bought House of Fraser for £90m in cash. Ashley, who also owns Newcastle United, promised to turn the struggling chain into “the Harrods of the high street”, keeping as many stores open as possible.
The chain was put into administration after talks with its creditors, which went on until 3am in the morning, failed to produce a better option.The chain was put into administration after talks with its creditors, which went on until 3am in the morning, failed to produce a better option.
The loss-making retailer had a £400m debt pile and the deal will see its secured lenders, who are at the front of queue to be paid in the event of administration, recoup around 22p in the pound. For the department store chain’s suppliers, who are due to be paid about £60m next week, that figure is expected to be closer to 3p in the £1. The loss-making retailer had a £400m debt pile and the deal will see its secured lenders, who are at the front of queue to be paid in the event of administration, recoup around 22p in the pound. The store chain’s suppliers, who were due to be paid about £60m next week, are expected to get only 3p in the £1.
House of Fraser’s fund will now be assessed by the pension protection fund (PPF), the industry backed lifeboat scheme. As it is in surplus by about £20m as measured by the PPF, it is possible the scheme could be taken on by an insurance firm. However, any deal is likely to fall short of their full benefits if House of Fraser had survived. House of Fraser’s pension fund will now be assessed by the pension protection fund (PPF), the industry-backed lifeboat scheme. As it is in surplus by about £20m as measured by the PPF, it is possible the scheme could be taken over by an insurance firm. However, any deal is still likely to fall short of previously promised benefits.
All 59 House of Fraser stores will come under Sports Direct’s control and all 17,000 staff are being transferred on the same employment terms and conditions. However, Ashley’s plans for the business are not clear and it may be that some stores close in the future. All 59 House of Fraser stores will come under Sports Direct’s control and all 16,000 staff are being transferred on the same employment terms and conditions. However, Ashley’s plans for the business are not clear, and some stores close in the future.
Mike Ashley’s empire (held through his Mash Holdings private company):Mike Ashley’s empire (held through his Mash Holdings private company):
Sports Direct (Ashley owns 61%)Sports Direct (Ashley owns 61%)
•757 sports stores in the UK and Europe.•757 sports stores in the UK and Europe.
• 73 casual fashion stores in the UK - including USC, Flannels and Cruise.• 73 casual fashion stores in the UK - including USC, Flannels and Cruise.
• Range of sports and fashion brands - including Slazenger, Everlast, Lonsdale, Karrimor, Kangol, No Fear and Firetrap.• Range of sports and fashion brands - including Slazenger, Everlast, Lonsdale, Karrimor, Kangol, No Fear and Firetrap.
• “Strategic” investments:• “Strategic” investments:
29.7% of Debenhams.29.7% of Debenhams.
27% of French Connection.27% of French Connection.
25.4% of Game Digital.25.4% of Game Digital.
29.9% of Findel (owner of Express Gifts).29.9% of Findel (owner of Express Gifts).
18.9% of Goals Soccer Centres.18.9% of Goals Soccer Centres.
4.8% of MySale (online discounter).4.8% of MySale (online discounter).
8.6% of Iconix Brands ( Lee Cooper and Umbro).8.6% of Iconix Brands ( Lee Cooper and Umbro).
Newcastle United football clubNewcastle United football club
Property lnvestmentsProperty lnvestments
Properties including the Lion Hotel in Worksop, his family home in north London and two chalets in Switzerland.Properties including the Lion Hotel in Worksop, his family home in north London and two chalets in Switzerland.
Radar RadioRadar Radio
Run by Ashley’s son Ollie.Run by Ashley’s son Ollie.
Four HoldingsFour Holdings
Owns Agent Provocateur lingerie.Owns Agent Provocateur lingerie.
Acts as an agency for other brands.Acts as an agency for other brands.
Runs 11 other stores, including upmarket 18montrose fashion outlets.Runs 11 other stores, including upmarket 18montrose fashion outlets.
Rangers RetailRangers Retail
Rights to sell Rangers kit, currently the subject of a legal battle with the Scottish football club.Rights to sell Rangers kit, currently the subject of a legal battle with the Scottish football club.
The retailer’s previous owner, Nanjing Cenbest, part of China’s Sanpower conglomerate, had planned to close 31 of the stores using a company voluntary arrangement (CVA), an insolvency procedure, but that deal lapsed when the 169-year-old House of Fraserbusiness crashed into administration.The retailer’s previous owner, Nanjing Cenbest, part of China’s Sanpower conglomerate, had planned to close 31 of the stores using a company voluntary arrangement (CVA), an insolvency procedure, but that deal lapsed when the 169-year-old House of Fraserbusiness crashed into administration.
Ashley, whose business empire also includes a US sports business and a luxury London property development, has long wanted to take control of House of Fraser. He bought an 11% stake in 2014, when 89% of the business was sold to Sanpower in a deal worth £480m.Ashley, whose business empire also includes a US sports business and a luxury London property development, has long wanted to take control of House of Fraser. He bought an 11% stake in 2014, when 89% of the business was sold to Sanpower in a deal worth £480m.
The Sports Direct founder has considered buying a department store chain for several years. He also has a 29.7% stake in House of Fraser’s rival Debenhams. The Sports Direct founder also has a 29.7% stake in House of Fraser’s rival Debenhams.
House of Fraser traces its origins back to 1849, when Hugh Fraser and James Arthur opened a drapery shop on the corner of Argyle Street and Buchanan Street in the centre of Glasgow. By 1941, it had expanded into a number of shops in Scotland and became House of Fraser.House of Fraser traces its origins back to 1849, when Hugh Fraser and James Arthur opened a drapery shop on the corner of Argyle Street and Buchanan Street in the centre of Glasgow. By 1941, it had expanded into a number of shops in Scotland and became House of Fraser.
The 1950s marked a period of major expansion for House of Fraser. In 1953, still owned by the Fraser family, the group extended its geographic reach across Scotland and into north-east England and Carlisle with the purchase of the Binns chain, which had its origins in an early 19th century Sunderland drapery business. Harrods, the luxury London department store, and Dickins & Jones, became part of the House of Fraser group in the late 1950s.The 1950s marked a period of major expansion for House of Fraser. In 1953, still owned by the Fraser family, the group extended its geographic reach across Scotland and into north-east England and Carlisle with the purchase of the Binns chain, which had its origins in an early 19th century Sunderland drapery business. Harrods, the luxury London department store, and Dickins & Jones, became part of the House of Fraser group in the late 1950s.
Growth continued in the 1970s, with the addition of well-known names such as Rackhams, the Army & Navy stores and Dingles.Growth continued in the 1970s, with the addition of well-known names such as Rackhams, the Army & Navy stores and Dingles.
Change came in 1985 when the House of Fraser group was bought by the Al Fayed family for £615m and a new business strategy was announced, with plans to replace smaller branches with larger stores.Change came in 1985 when the House of Fraser group was bought by the Al Fayed family for £615m and a new business strategy was announced, with plans to replace smaller branches with larger stores.
In 1994 House of Fraser was floated on the London Stock Exchange at a market value of £484m, with Harrods split off and kept under private ownership by Al Fayed.In 1994 House of Fraser was floated on the London Stock Exchange at a market value of £484m, with Harrods split off and kept under private ownership by Al Fayed.
A takeover bid from Scottish retail entrepreneur Tom Hunter was rejected in 2003 and some branches in Scotland were sold or closed.A takeover bid from Scottish retail entrepreneur Tom Hunter was rejected in 2003 and some branches in Scotland were sold or closed.
However, two years later the group was in expansion mode again, buying 16 stores under the Jenners and Beatties brands became part of the group in 2005. Large new store openings followed in 2008 at locations including Belfast, Bristol and the Westfield shopping centre in west London.However, two years later the group was in expansion mode again, buying 16 stores under the Jenners and Beatties brands became part of the group in 2005. Large new store openings followed in 2008 at locations including Belfast, Bristol and the Westfield shopping centre in west London.
In 2013, House of Fraser opened its first store overseas, in Abu Dhabi’s World Trade Center shopping mall.In 2013, House of Fraser opened its first store overseas, in Abu Dhabi’s World Trade Center shopping mall.
House of Fraser was bought by China’s Nanjing Xinjiekou Department Store Co – also known as Nanjing Cenbest – in 2014. Angela MonaghanHouse of Fraser was bought by China’s Nanjing Xinjiekou Department Store Co – also known as Nanjing Cenbest – in 2014. Angela Monaghan
The addition of House of Fraser to the Sports Direct group will create a new force in high street retailing with annual sales of ???. Sports Direct also owns the famous London sportswear store Lillywhites and Flannels, a designer fashion chain. The addition of House of Fraser to the Sports Direct group will create a new force in high street retailing with annual sales of £4.1bn – bigger than fashion and homewares chain Next. Sports Direct also owns the famous London sportswear store Lillywhites and designer fashion chain Flannels.
Ashley has owned the once-upmarket Lillywhites, in London’s Piccadilly Circus, since 2002 but on his watch it has switched to the discount formula favoured by the Sports Direct stores. Ashley has owned the once-upmarket Lillywhites, in London’s Piccadilly Circus, since 2002 but on his watch it has switched to the pile-it-high, sell-it-cheap formula favoured by the Sports Direct stores.
The 24-store Flannels chain, which sells brands such as Mulberry, Versace Jeans and Paul Smith, is more upmarket. As yet it is unclear which direction the Sports Direct tycoon plans to take House of Fraser but some analysts suggested there would also be potential to turn some stores into Sports Direct outlets.
Scott Lennon, a regional officer at Unite, said the union was worried about how the Sports Direct takeover would affect working conditions at the House of Fraser: “The staff are entering a period of great uncertainty and worry.”Scott Lennon, a regional officer at Unite, said the union was worried about how the Sports Direct takeover would affect working conditions at the House of Fraser: “The staff are entering a period of great uncertainty and worry.”
A Guardian investigation in 2015 found that temporary workers at Sports Direct at its Shirebrook warehouse operation in the East Midlands were effectively receiving hourly rates of pay below the minimum wage. A Guardian investigation in 2015 found workers at Sports Direct’s Shirebrook warehouse operation in the East Midlands effectively receiving hourly rates of pay below the minimum wage.
“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,” Lennon added.“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,” Lennon added.
House of Fraser has been scrabbling to find a new buyer since the start of this month when C.banner, the Hong Kong-listed owner of Hamleys, pulled out of a commitment to invest £70m in the business.House of Fraser has been scrabbling to find a new buyer since the start of this month when C.banner, the Hong Kong-listed owner of Hamleys, pulled out of a commitment to invest £70m in the business.
House of Fraser has been struggling as fewer Britons visit the high street while last year’s increase in business rates has also made running large high street stores even more expensive at a time when sales are moving online. Critics of the property tax argue that it gives online retailers such an Amazon an unfair advantage over traditional high street chains. House of Fraser has been struggling as fewer shoppers visit the high street while last year’s increase in business rates has also made running large high street stores even more expensive at a time when sales are moving online. Critics of the property tax argue that it gives online retailers such an Amazon an unfair advantage over traditional high street chains.
Speaking on Friday, the chancellor, Philip Hammond, hinted at what has been billed as an “Amazon tax” to level the playing field between high street and online players. Hammond told Sky News that any tax changes would require new international agreements: “That requires us to renegotiate international tax treaties because many of the big online businesses are international companies,” he said. “And we also agree with the French and the Germans that if we can’t get international engagement to do this, we may have to look at temporary tax measures to rebalance the playing field until we can get international agreements sorted out.”
“We want to make sure that the high street remains resilient and that … taxation is fair between businesses doing business the traditional way and those doing business online,” Hammond told Sky News. The European Union has been talking about a tax on online platform businesses based on the value generated and Hammond said that was something he was “prepared to consider”.
“That requires us to renegotiate international tax treaties because many of the big online businesses are international companies,” he added. “The EU has been talking about a tax on online platform businesses, based on the value generated”. The speed of the House of FRaser/ Sports Direct deal surprised other potential bidders, including Philip Day, the owner of Edinburgh Woollen Mill. A source close to Day claimed the entrepreneur had put forward a proposal on Thursday and attempted to follow it up on Friday morning with a £100m offer. However, deal insiders countered: “There was only one bid on the table last night and there was no offer this morning.”
Events have moved quickly at House of Fraser. On Thursday it told investors that it needed to raise new funds by no later than 20 August.
However, on Friday morning House of Fraser appointed the accountancy firm EY as administrators after last-ditch overnight talks with investors and creditors had “not concluded in a solvent solution”. By 10am, however, it had been confirmed that Sports Direct was the group’s new owner.
The speed of the deal surprised other potential bidders, including Philip Day, the owner of Edinburgh Woollen Mill, and the restructuring specialist Alteri, which had been asked to submit best offers this week as the group’s lenders considered their options.
A source close to Day claimed the entrepreneur was surprised to see Ashley clinch the deal as he had put forward a solvent proposal on Thursday and attempted to follow it up on Friday morning with a £100m offer. However, deal insiders countered: “There was only one bid on the table last night and there was no offer this morning.”
Alan Hudson, one of the joint administrators, described the attempt to find a new owner as a “race against time”.Alan Hudson, one of the joint administrators, described the attempt to find a new owner as a “race against time”.
Hudson said: “We are pleased that we have been able to successfully conclude a sale of the business in short timescales which preserves as many of the jobs of House of Frasers employees as possible. Hudson said: “We are pleased that we have been able to successfully conclude a sale of the business in short timescales which preserves as many of the jobs of House of Frasers employees as possible. We hope that this will give the business the stable financial platform that it requires to flourish in the current retail environment.”
“It was a challenging transaction to achieve in such a short period of time which will ensure continuity of the business and preserve the goodwill,” Hudson continued. “We hope that this will give the business the stable financial platform that it requires to flourish in the current retail environment.” Richard Lim, the chief executive of Retail Economics, said: “This is a hugely ambitious move for Sports Direct. The combination of both businesses will yield some vital cost-savings while it’s likely that some of the struggling House of Fraser sites will be rebranded to Sports Direct.”
Richard Lim, the chief executive of Retail Economics, said: “This is a hugely ambitious move for Sports Direct. The combination of both businesses will yield some vital cost-saving synergies while it’s likely that some of the struggling House of Fraser sites will be rebranded to Sports Direct.”
He added: “This [department store] is a part of the industry that is under a huge amount of pressure. Turning around the business will not come easy.”He added: “This [department store] is a part of the industry that is under a huge amount of pressure. Turning around the business will not come easy.”
House of FraserHouse of Fraser
Retail industryRetail industry
Mike AshleyMike Ashley
Job lossesJob losses
Sports Direct InternationalSports Direct International
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