Chinese Conglomerate Bids £450m for House of Fraser

House of Fraser was all set to float on the stock exchange, but news has emerged that a Chinese business conglomerate has mounted a last-minute takeover bid.

Chinese businessman Yuan Yafei could well become the new owner of one of the UK’s most well-established department store chains, after news emerged over the weekend that the conglomerate he controls has made a takeover bid for House of Fraser.

Sanpower has offered to purchase House of Fraser, a 160-year-old British household name, for somewhere close to £450 million, reports suggest, following on from a succession of failed bids. Talks failed in January with both French firm Galeries Lafayette and Mike Ashley, founder of Sports Direct.

But the bid has come as something of a surprise, especially when bankers are in the process of planning an initial public offering (IPO) for the company. Though analysts had known that the firm planned to keep its options open by seeking a buyer at the same time as preparing to float on the stock market, commentators were beginning to suspect that the time for offers had passed.

Still, it will be interesting to see whether the deal goes through once Sanpower has negotiated the complex structure of House of Fraser. Baugur owned the company until it went into administration in 2008 – and when it was rescued, its saviour was none other than ill-fated Icelandic bank Landsbanki.

As a result, Baugur still has a stake but now contends with a group of wealthy investors. Though chairman Don McCarthy, who owns 20 per cent of the company, has brokered the deal and apparently accepted it even before taking it to the other shareholders, Management Today suggests that other investors may be less enthusiastic, opting instead for an IPO that could see their stakes rise in value.

House of Fraser is definitely a company with plenty of potential – at a time when high street rival Debenhams has issued profit warnings and lacklustre Christmas sales for many of its rivals, sales in House of Fraser actually rose by 7.3 per cent. It’s one of the leading lights in the current retail landscape.

Sanpower already controls several shopping centres in China, so it’s quite possible that a strong retail brand would make a welcome addition to its portfolio. House of Fraser might also benefit from the commercial expertise and investment potential it could bring. But there are plenty of options available to the company, and it is not yet certain which road it will take.