The owner of Hamleys has confirmed it is to take majority ownership of struggling department store chain House of Fraser, and will oversee a sweeping store closure programme.
C.banner, the Chinese retailer behind Hamleys, said it will buy a 51% stake in House of Fraser from its parent Nanjing Cenbest, with £70 million changing hands in the process.
C.banner has also committed to making a significant investment into the business.
However, the sale is conditional on House of Fraser shutting stores.
The 59-strong chain will put forward a restructuring plan known as a company voluntary arrangement (CVA), which will require the approval of landlords and bondholders.
We know that if we are to deliver a sustainable, long-term business then we need to make difficult decisions about our under-performing legacy storesFrank Slevin
Frank Slevin, chairman of House of Fraser, said C.banner’s acquisition was “a step to securing House of Fraser’s long-term future”.
“C.banner’s investment is a vote of confidence in our prospects,” he said.
“We know that if we are to deliver a sustainable, long-term business then we need to make difficult decisions about our under-performing legacy stores.
“I am all too aware that this creates uncertainty for my colleagues in the business and so we will be transparent with them throughout the process.”
The British Property Federation (BPF), which represents landlords, hit out at House of Fraser for its proposal, saying the company had not followed best practice in its approach to the CVA.
Ian Fletcher, director of real estate policy at the BPF, said: “Announcing the CVA via a statement on new investment, whilst helpful to the overall continuation of the business, is highly insensitive when you are asking property investors to absorb large losses.
“We think any discussions on this CVA will therefore be awkward and any support for the CVA given grudgingly.”
House of Fraser’s troubles came to the fore in January after it suffered a drop in sales over Christmas and started talking to landlords about reducing the size of its property portfolio.
KPMG has been drafted in to advise House of Fraser on its restructuring proposal, with the terms of the plan likely to be finalised at the beginning of June.
House of Fraser is a subsidiary of Sanpower, a Chinese conglomerate chaired by Yuan Yafei.
Mr Yuan has voiced his commitment to House of Fraser, which has 6,000 employees and 11,500 concession staff, and has been pumping millions of pounds into the retailer to keep it on an even keel.
Several household names have pursued CVAs so far this year in a bid to save costs, including New Look, Carpetright and burger chain Byron.