The acquisition of UK companies by overseas firms has become a common occurrence of late, with the improving economic situation allowing many to expand as a result of profits growth. However, one of the most controversial deals has been Chinese conglomerate Sanpower’s purchase of a majority stake in iconic British department store House of Fraser, especially given the involvement in the business by Newcastle United and Sports Direct owner Mike Ashley.
Sanpower now owns 89 per cent of shares in the 165 year old department store chain, with the £480 million price tag for the deal touted as the largest overseas acquisition made by a Chinese business, the remaining 11 per cent are now in the possession of Mr Ashley. The stake was purchased through subsidiary Nanjing Cenbest and Sanpower is currently going through the formalities required to complete the transaction, including preparing a statement confirming its purchase with the Shanghai Stock Exchange on Monday.
However, the only remaining fly in the ointment is the 11 per cent stake purchased by Mr Ashley from retail investor Sir Tom Hunter, which he is strongly rumoured to be considering selling to Sanpower. House of Fraser will be launching legal proceedings against Sir Tom in a bid to resolve the issue – the retailer argues that existing shareholders should have been offered first refusal on the stake before he accepted an offer from an external bidder.
A House of Fraser spokesman said; “House of Fraser will lead [the legal efforts].
“A legal letter has been sent, and Tom Hunter has responded – House of Fraser will be dealing with that over the next few days.”
Unfortunately, the legal proceedings may not be quite as straightforward as House of Fraser’s board would hope, as Sir Tom insists that he placed the offer on the table for other investors to buy his shares. When none took him up on the offer, he claims, he agreed to a deal with Mr Ashley, who has been in on/off talks to purchase a controlling interest in House of Fraser for the past two years.
Sir Tom’s spokesman said; “We are very comfortable with our legal position.
“We have sold the stake and the money is in our bank account.”
Legal disputes aside, the transaction between House of Fraser and Sanpower has otherwise gone very smoothly. At the present moment, House of Fraser does not believe the takeover will have any effect upon the 7,300 permanent staff members working in the UK, nor upon the brands with 12,000 employees running concessionary floor spaces within the stores.
Looking forward, it is expected that Sanpower will examine expansion options both here in the UK and overseas, with analysts predicting that the primary target markets will be in Sanpower’s local markets in the Far and Middle East. This process has already reportedly begun, with the conglomerate planning to open 20 new stores in China under the moniker Oriental Fraser.
