House of Fraser Bought by Mike Ashley

Something of a British institution, House of Fraser has been trading for almost 200 years. That almost came to an abrupt end this month. It’s no secret the chain has been in trouble, with store closures and restructuring on the horizon since the company agreed a CVA with Chinese firm C.Banner. Unfortunately for House of Fraser, C.Banner pulled out of the deal at the last minute, leaving the company in even deeper trouble, and forcing it to enter administration.Enter Mike Ashley, owner of Sports Direct. Ashley has made the majority of his money buying up struggling brands. He was quick to snap up House of Fraser, closing the deal in a matter of hours after the chain announced it was entering administration.

  When did the Trouble Start?

The chain started slating stores for closure back in June, as part of the CVA and deal with C.Banner. There were issues even before C.Banner became involved however. The company was planning to build and open a new store in Chester in 2017, but these plans were put on hold after the company started to experience financial difficulty.

House of Fraser aren’t the only retailer to face problems of course – an increasingly difficult climate has led to a number of companies hoping that a CVA will enable them to streamline their business and remain open. Other companies in similar situations recently include Mothercare, New Look, and Carpetright.

  Can Mike Ashley Turn Things Around?

While it might seem that Ahsley has swooped in out of nowhere to pick up the ailing chain, he has had his sights on House of Fraser for some time. His main company, Sports Direct, already owns a notable amount of stocks in the company – enough in fact, to make a legal challenge when C.Banner agreed to buy House of Fraser some months ago.

At the time, Sports Direct filed litigation, saying that: “We have been frozen out by House of Fraser. Their dealings in China are opaque, and it is blatant that we have been unfairly prejudiced. We have no option other than litigation to protect the interests of Sports Direct and its shareholders.”

Additionally, Mike Ashley is well known for buying up brands that are on the edge of collapse. He also tends to buy small stakes in a variety of companies and brands with this in mind. One banker once described him as someone who ‘likes to park his tanks on other people’s lawns.’

Regardless, Ashley has so far managed to turn around a number of brands that were facing oblivion in the past.

His general approach to business, however, is not one that endears him to most investors and the City in general, but it’s hard to argue with his success.

Ashley said his goal for House of Fraser was to build the ‘Harrods of the High Street’, although what that actually means is anybody’s guess. The financial problems facing the retailer won’t vanish overnight, no matter who owns it – only time will tell if House of Fraser will continue to trade for another 2, 20, or 200 years.