Frasers confirms Debenhams interest, but no deal guaranteed

By

Sandra Halliday

Published
Dec 7, 2020

Mike Ashley's Frasers Group confirmed on Monday that it’s interested in buying Debenhams even though the auction for the Department store chain has already ended and the chain is expected to close completely by next March.

Frasers had previously been rebuffed by Debenhams’ advisers who said that its £125 million offer wasn't high enough.

But with the only alternative now being liquidation, the ongoing interest Frasers has in taking over Debenhams could be the last chance to save up to 12,000 jobs and 124 shops in the UK.

In a stock exchange announcement, Frasers confirmed “that it is in negotiations with the administrators of Debenhams' UK business regarding a potential rescue transaction for Debenhams' UK operations”. It didn’t confirm weekend reports that it could be offering up to £200 million.

It added: “Whilst Frasers Group hopes that a rescue package can be put in place and jobs saved, time is short and the position is further complicated by the recent administration of the Arcadia Group, Debenhams' biggest concession holder. There is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly.”

Frasers already owns rival Department store chain House of Fraser, as well as a raft of other chains such as Flannels, Jack Wills and the giant Sports Direct business.

It has long had ambitions to acquire Debenhams since the days when Debenhams was a listed company and Frasers built up a stake of almost 30% in it for a cost of around £150 million. 

But it’s unclear just how much of the business the company would want to continue operating. Debenhams had itself come up with a plan for any potential buyer to continue with 60 of its current department stores.

Professor John Colley, Associate Dean of Warwick Business School, told The Guardian that Ashley will be hoping to take on the most profitable parts of the business.

“Mike Ashley has learnt the best way to buy a business is out of administration as there is no debt and all contracts can be renegotiated,” he said. “This is ideal as his real strength is negotiating efficient and low-cost supply chains.

“Administrations also mean the buyer can take the profitable parts and leave the rest. Mike has waited for ‘last shout’ — that is the announcement of liquidation — to get the best deal. The good news is it is likely some stores and jobs will be retained”.

While he wasn’t hopeful that Debenhams would be an appealing place to visit post-acquisition, he said the alternative would be worse. 

“If he is successful Debenhams is likely to take on the same feel and appearance as his House of Fraser stores, lacking in soul, with cut down ranges and much reduced floor space. However, that is much better that the alternative - major closures and hollowed out town centres,” he said.