Mike Ashley’s Sports Direct has struck a deal to buy House of Fraser out of administration for £90 million.
The announcement was made on Friday after House of Fraser fell into administration, endangering the jobs of 17,000 staff.
The department store chain said earlier on Friday that discussions between interested investors and its main creditors had not concluded in a “solvent solution”, and that it had no choice but to appoint administrators.
But in a stock market announcement, Sports Direct said it has acquired all of the UK stores of House of Fraser, the brand and all of the stock in the business.
Prior to its collapse, Mike Ashley had held an 11% stake in the department store chain.
Staff are being informed that they will be transferred over from House of Fraser to Sports Direct.
Ashley said the purchase was a “massive step forward and further enhances our strategy of elevation across the Group”.
He continued: “This will benefit both House of Fraser and Flannels in the luxury sector. We will do our best to keep as many stores open as possible.
“It is vital that we restore the right level of ongoing relationships with the luxury brands. Our deal was conservative, consistent and simple. My ambition is to transform House of Fraser into the Harrods of the High Street.”
Following the announcement, Chancellor Philip Hammond hinted at possible tax changes to ensure high street retailers are able to compete with online rivals.
“We want to make sure that the high street remains resilient and that we also make sure that taxation is fair between businesses doing business the traditional way and those doing business online,” he told Sky News.
“That requires us to renegotiate international tax treaties because many of the big online businesses are international companies.”
He added: “The European Union has been talking about a tax on online platform businesses based on the value generated.”
Labour’s shadow business secretary Rebecca Long-Bailey lamented the job losses felt across Britain’s high streets in recent months and blamed the Conservatives for “doing nothing”.
“Their inaction has prepared the ground for the likes of Mike Ashley, notorious for his company’s poor treatment of workers, to hoover up businesses. Staff will undoubtedly be concerned about what the sale means for their wages and conditions.
“How many more of our most recognisable high street brands have to go under before the Prime Minister steps up and addresses the broken business rates system which is turning our high streets into ghost towns?”
Liberal Democrat leader Sir Vince Cable echoed the call to scrap business rates so that high street retailers could compete with online sellers.
“This is yet another example of the crisis in our high streets. There are many factors that appear to have contributed to this administration, some of which we can do little about,” he said.
“But one factor is online competition – and we must create a level playing field between the high street and the big tech retailers.
“This means scrapping business rates – a motion that will be put to the Liberal Democrat conference next month – and making sure big tech starts paying its fair share in taxation.”
Commenting on the sale, Scott Lennon, of the union Unite, 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.”
Lennon continued: “Sports Direct’s record at the Shirebrook warehouse operation in the East Midlands has been dreadful and, despite the recent terrible publicity, wages remain at the minimum legally payable, and the terms and employment conditions are threadbare.
“We fear for jobs and employment conditions at the House of Fraser going forward. The staff are entering a period of great uncertainty and worry.”
More than 6,000 roles had already been earmarked to be lost at House of Fraser, with the closure of 31 of its 59 stores.
House of Fraser assured that its offices and stores will continue trading as normal while they look to reach a deal.
“All stores will be open for business as usual today,” it said in an announcement to the Luxembourg Stock Exchange.
Chief executive Alex Williamson 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.”
House of Fraser was plunged into fresh crisis after C.banner, the Chinese owner of Hamleys, pulled its investment into the troubled retail chain.
C.banner was planning to buy a 51% stake in House of Fraser and plough £70 million into the ailing retailer, but scrapped the move last week.
Without £40m of new funding by 20 August to pay concession operators, HoF would be unable to survive, with further money required to meet the chain’s £5m-a-month rent bill, Sky News reported.
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.”
So far this year, Maplin, Poundworld and Toys R Us UK have all fallen into administration, triggering about 10,000 job losses.