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House of Fraser to appoint administrators after investment talks fail

11 August 2018

Since then, it has been revealed that Mike Ashley's Sports Direct has struck a deal to rescue House of Fraser out of administration for £90 million, raising hopes for the future of thousands of staff.

Prior to the administration Sports Direct had owned 11 percent of House of Fraser.

House of Fraser in The Oracle.

The deal expands Mr Ashley's retail empire, which also includes a stake in Debenhams.

Court hearings are expected to take place at 7:30am today, "at which orders will be sought appointing individuals from Earnest & Young as administrators of each of the operating companies with immediate effect", the filing said.

The tycoon beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill.

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Details of Mr Ashley's plans for HoF, including how numerous 17,500 people who work for the company and its concession operators will keep their jobs, are unclear.

A spokesperson for House of Fraser said this was "only a temporary situation and will be resolved".

However, accountancy giant EY, which was overseeing the process, opted for Mr Ashley's offer.

"This will benefit both House of Fraser and Flannels in the luxury sector".

The chain's collapse should not be the trigger for policy shifts.

Buying other businesses and strategic stakes forms part of that plan - equity investments have been made in Debenhams, French Connection, Game Digital, Findel and Goals Soccer Centres.

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A string of United Kingdom retailers have either gone out of business or announced plans to close shops this year, as they struggle with subdued consumer spending, rising labour costs and higher business property taxes as well as growing online competition, particularly from Amazon.

House of Fraser had said in June it needed to shut 31 stores and make up to 6,000 people redundant to survive, but that rescue programme was thwarted after Chinese group C.banner pulled out of a plan to inject fresh equity.

The company saw its business rates bills rise £3.99 million to £30.24 million this year following a Government revaluation, according to research group Altus.

The Unite union said despite a media storm over the treatment of staff at Sports Direct's Shirebrook warehouse, wages remained at a minimum and employment conditions were "threadbare".

"The race is on to pivot business structures fast enough to be fit-for-purpose in today's digital world. The demise of House of Fraser in many ways has been the result of poor leadership, paralysis in innovation and crippling levels of debt", Mr Lim added.

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House of Fraser to appoint administrators after investment talks fail