Frasers Group has today confirmed it is in talks with Debenhams’ administrators that could end in a last minute rescue of the business.
Those administrators, from FRP Advisory, said last week they would start to wind down Debenhams following the ending of takeover discussions. The ending of the talks, with JD Sports, came soon after the Arcadia Group, Debenhams’ biggest concession holder, itself went into administration.
Today Frasers Group said that the failure of Arcadia complicated the potential rescue. It said in a statement: “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.”
The winding down of Debenhams and the closure of its 124 shops and associated warehouses puts an estimated 12,000 jobs at risk.
Long-held strategic ambition
If Frasers Group, owned by Mike Ashley, is successful in buying Debenhams it will fulfil a long-held ambition.
The retail group, formerly Sports Direct, was a Debenhams shareholder – with a 29% stake in the business – until its administration in 2019. Sports Direct offered more than once to take over Debenhams, which has been struggling to survive for years, but its £100m offer was half of the £200m the department store’s existing lenders were preparing to put in to secure its rescue.
If Frasers Group does buy Debenhams, it will be the latest in a long line of acquisitions of troubled companies. In 2018 it bought department store House of Fraser and Evans cycles out of administration, before going on in 2019 to buy sofa.com, Game and Jack Wills. Mike Ashley has gone on to express regret about some of those purchases – saying in full-year results in 2019 that “if we had the gift of hindsight we might have made a different decision in August 2018”.
Frasers Group has previously set out a strategy of multichannel elevation that aims to take the business upmarket in order to appeal to the premium brands that it would like to sell in its stores. It went as far as changing its own name, from Sports Direct to Frasers Group, as it looked to achieve that end.
Commenting on today’s news, Liam Patterson, chief executive and founder of Bidnamic, says: “Debenhams’ survival and long term future rests with Fraser Group. If the deal between the two goes ahead, the sports fashion retailer will have to completely turn the fortunes of Debenhams around.” But he says the challenge cannot be understated.
“The top priority facing any new owner should be a complete digital overhaul,” says Patterson The retailer lacks the online presence of competitors such as Asos and Amazon and has therefore suffered heavily during the pandemic. If Fraser Group is going to revive the 242-year-old retailer then it needs to focus less on its brick and mortar offering by creating an effective digital strategy that is in line with shoppers’ buying habits.”