Mike Ashley is now the high street’s emperor
Events around House of Fraser moved so fast on Friday morning that people could have left their house to the news that the retailer had collapsed into administration and would have got to work in time to hear it had been rescued.
Mike Ashley’s Sports Direct swooped to the department store’s aid, paying £90m for all 59 UK stores, the brand, and the stock. It represented something of a bargain, considering that House of Fraser’s enterprise value stood at £450m just four years ago.
One of the most pressing questions is how Ashley pulled this off when other bidders were also vying for the business. It is a question on the lips of many in the industry, who are still reeling from a series of twists and turns that has made Ashley one of the most powerful men on the high street.
House of Fraser ran into serious financial danger last month when a legal challenge to its company voluntary arrangement (CVA) caused a delay in the £70m worth of funding promised by prospective owner C.banner.
But Ashley had already approached the business about the possibility of providing some kind of backing, with the first engagement taking place on 2 July, four weeks before C.banner warned it might be unable to fulfil its promise.
By the beginning of August, just under a month after Ashley first made his move on House of Fraser, C.banner issued a profit warning and confirmed it was pulling out of a deal to buy 51 per cent of the department store.
There were several rescue bids being worked on by the likes of Philip Day and Alteri, but by Friday morning House of Fraser was appointing administrators. Shortly afterwards, Ashley’s £90m offer was accepted even though Day was still prepared to pay £100m for the chain.
A source familiar with the process said that administrators had not engaged with Day’s bid. A representative for EY said that at the time of the appointment, no solvent proposals were on the table.
Industry commentators now expect Ashley to convert at least some of the House of Fraser sites into Sports Direct stores.
Meanwhile, with the CVA now void and little detail on future plans, landlords are wondering whether to continue with contingency plans for stores or wait on the decisions of Mike Ashley, the new emperor of the high street.