Mike Ashley’s Frasers Group says it is looking to rescue foundering Debenhams

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Frasers Group PLC (LON:FRAS), the owner of House of Fraser and Sports Direct, said it is talking to the administrators of Debenhams PLC about potentially buying its UK business.


The FTSE 250-listed company run by Mike Ashley put out a statement today to confirm weekend reports that it is looking to snap up most of the embattled department store chain.


Frasers said it “hopes that a rescue package can be put in place and jobs saved” but that “time is short and the position is further complicated by the recent administration of the Arcadia Group”.


Reports have suggested Ashley is attempting to cut a deal that could value Debenhams at more than GBP200mln.


Philip Green’s Arcadia, which went into administration a week ago, is the biggest operator of retail concessions in Debenhams stores, representing around 5% of annual revenue.


“There is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly,” the FTSE 250-listed company said in a statement.


Debenhams’ US hedge fund owner Silver Point Capital has been looking for a buyer for some time and has previously been in talks with Ashley and rival boss Peter Cowgill of JD Sports Fashion PLC (LON:JD.), which pulled out of talks last Monday.


Frasers, which had a GBP150mln stake in Debenhams wiped out in a debt-for-equity swap last year, was not willing to pay the GBP300mln demanded.


There have been reports that Ashley was raging at being frozen out of talks by Debenhams investment banks.


Shares in Frasers, which is due to report interim results this Thursday, fell 3% to 421.4p in early trading.


Broker Shore Capital said this is Ashley’s “last play” after having a large equity stake wiped out already.


Analyst Greg Lawless said the deal will depend on the amount of stock left in Debenhams and forward orders for Spring Summer 21 product, with some of last spring and summer’s product will have been hibernated due to last March’s lockdown.


“Any deal with Frasers Group would probably see a portfolio of Debenhams operated under a 12 month licence. We also wonder how many Debenhams stores that will survive long term, alongside Fraser Group’s House of Fraser fascia. Many of the stores sit adjacent to each other,” Lawless said.


“Frasers is known to be a hard negotiator and will probably walk away rather than over pay.”


–Adds shares and broker comment–

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