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Sports Direct Snaps Up Bankrupt House of Fraser for 90 Million Pounds

Sports Direct boss Mike Ashley has agreed to purchase the business and assets of British retailer House of Fraser, which was placed into bankruptcy protection — for a few hours — on Friday morning. Ashley is paying 90 million pounds ($115 million) for all of HoF’s U.K. stores, the brand and the stock, Sports Direct has confirmed.

Early Friday morning, House of Fraser sought bankruptcy protection after talks to find a new investor failed. Ashley was widely expected to seal a last-minute deal once HoF was placed into administration, the U.K. equivalent of Chapter 11.

Cash-strapped House of Fraser, which had been scrambling since the start of August to find an investor, said in a statement to the Luxembourg Stock Exchange early Friday that its discussions with interested investors and its main secured creditors had not concluded in a “solvent solution.”

As a result, the directors of the group’s operating companies sought the appointment of administrators. Ernst & Young LLP was named shortly after 7 a.m., with the HoF statement adding they would likely conclude a transaction shortly.

Three bidders tabled offers this week for the cash-strapped HoF, which saw its potential buyer, the Chinese company C.banner, pull out of a deal to buy a 51 percent stake. C.banner had been hoping to raise money for the purchase by selling shares in its company, but their price collapsed suddenly on the Hong Kong Stock Exchange, forcing them to walk away this month.

The three bidders included Ashley, the controversial retail tycoon and owner of Sports Direct. He already has a stake in HoF — and a variety of other U.K. retailers, including Debenhams — and specializes in swooping in- on distressed companies. The Dubai, United Arab Emirates-based owner of Jaeger Philip Day and Alteri, the retail turnaround specialists, were the two others.

The HoF statement added that significant progress had been made toward completing a sale of HoF’s business and assets, and that Ernst & Young would continue with the discussions with an eye to sealing a deal.

The statement said the business will continue trading, including all stores and offices. All stores will be open for business as usual on Friday. For the year ended January 2017, House of Fraser had gross assets of 946.3 million pounds and made 14.7 million pounds in net profit. The retailer had been desperate for a 70-million-pound investment from C.banner to purchase Christmas stock, pay its quarterly rent bill and keep the day-to-day business going.

“We are hopeful that the current negotiations will shortly be concluded,” said Alex Williamson, CEO of House of Fraser. “An acquisition of the 169-year-old retail business will see House of Fraser regain stability, certainty and financial strength.”

Williamson added that in the two weeks since the C.Banner transaction ceased, the group’s financial advisers have run “a comprehensive M&A process to identify and develop other third-party interest that has culminated in the senior secured creditors leading negotiations with parties at a critical pace.”

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. I am confident House of Fraser is close to securing its future.”

Sky News reported this week Ashley was close to buying HoF, although Ashley never actually confirmed his interest.

The HoF purchase is an encore performance for Ashley, who bought the upscale lingerie brand Agent Provocateur in much the same way. After falling on hard times and failing to find a buyer in early 2017, Agent Provocateur was placed briefly into bankruptcy protection.

Four Holdings, the slick fashion showroom and marketing company in which Ashley has a large stake, purchased the brand and has since relaunched it.

Although Ashley has not commented yet on the House of Fraser purchase or his plans for the future, it caps a long game for the retail tycoon, a colorful figure in U.K. retail who’s known for his unconventional deal-making and sometimes aggressive tactics.

In an op-ed last week The Daily Telegraph called Ashley the U.K. High Street’s “resident grim reaper” and said he has a history of waiting until rival retailers go bust and “then snapping up assets on the cheap.”

Ashley has repeatedly said he wants to take his businesses upmarket. His holdings range from the mass-market Sports Direct stores to the multibrand fashion retailer Flannels. He is also the owner of the Newcastle United Football Club.

In 2016, he splashed upward of 100 million pounds on a property on Oxford Street to house a Flannels flagship, which is set to open next year, and has said his plan is to transform Sports Direct into “the Selfridges of sports.”

In early 2016, he acquired 11 percent of another struggling retailer, French Connection, and also has stakes in Debenhams and JD Sports. Sports Direct, which was founded in 1982 and has nearly 700 stores worldwide, also has a minority stake in Iconix.

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