China's Sanpower Group buys House of Fraser for $750 mn

Sanpower Group, one of China's largest privately-owned business conglomerate, yesterday struck a deal to buy House of Fraser, in a deal valuing the 165 year-old historic British department retail chain at £450 million ($750 million) including debt.

Sanpower, founded in Nanjing in 1993 by former Chinese government official Yafei Yuan, is buying an 89-per cent stake in House of Fraser, making this China's largest foreign retail investment to date.

The deal ends House of Fraser's plans of separately looking at a £450-million flotation on the London Stock Exchange later this year.

The deal comes after House of Fraser held a series of failed takeover talks with prospective suitors, including Mike Ashley, the British billionaire retail entrepreneur, and French department store Galeries Lafayette, according to earlier media reports.

House of Fraser chairman Don McCarthy, whose family controls 20 per cent of the department retail chain, has already accepted Sanpower's offer.

Other stakeholders in House of Fraser are Highland Group Holdings owned by representatives of failed Icelandic banks Landesbanki and Glitnir with a 49-per cent stake, retail entrepreneurs Sir Tom Hunter and Kevin Stanford with 11 per cent and 9 per cent respectively, Lloyds Banking Group with 5 per cent and management with 6 per cent.

House of Fraser was founded in 1849 by Hugh Fraser and James Arthur as a small drapery in Glasgow, Scotland as Arthur and Fraser.

The retailer opened its flagship store on Oxford Street in London in 1879 and now has 61 stores in the UK & Ireland, 7,300 employees and annual sales of £1.2 billion ($2 billion).

It was first listed on the stock market in 1948 and was acquired in 1985 by Mohamed al-Fayed, former owner of the iconic Harrods Department Store.

It went public again in 1994 before being acquired by Iceland's Baugur Group in a £350-million deal.

Nanjing-based Sanpower, controlled by multimillionaire Yafei, is a Chinese conglomerate with businesses spanning IT, finance and investment, retail, media, and real estate.

With a workforce of nearly 30,000 and controlling more than 100 companies, including Jiangsu Hongtu High Technology Co and Nanjing Xinjiekou Department Store, Sanpower owns assets of more than Rmb50 billion ($8 billion), and has an annual turnover of more than Rmb56 billion (around $9 billion).

John King, CEO of House of Fraser, said that the deal was an "opportunity to take the brand to China."

House of Fraser is the latest British company acquired by a Chinese.

This is notthe first acquisition of an iconic British brand bya Chinese firm. Geely Manganese Bronze, the maker of London's black cabs, was bought by China's Geely for £11 million last year. Chinese companies also own Gieves & Hawkes, the Savile Row gentlemen's tailoring establishment founded in 1771, luxury yacht firm Sunseeker and breakfast favourite Weetabix.

But it was Geely that flagged China's growing economic might last year by taking full control of Manganese Bronze. (See: China syndrome: Geely to take over iconic London taxi cab maker)

Geely, which already held a 20-per cent stake in Coventry-based Manganese Bronze before the latter collapsed into administration in October 2012, paid a paltry £11 million ($17 million) on a debt-free basis for the acquisition.

Gieves & Hawkes, the 243-year-old Savile Row, London-located suiting establishment, whose customers included Winston Churchill, Charlie Chaplin, Michael Jackson, David Beckham, Bill Clinton, George Bush and Diana, was acquired in 2012 by Hong Kong conglomerate Trinity Ltd.

Britain's largest luxury yacht maker Sunseeker, whose yachts have appeared in several James Bond movies, was acquired last year by Chinese property group Dalian Wanda for $470 million, and Chinese state-backed food company Bright Food acquired a 60 per cent stake in Weetabix in a deal that valued the British cereal maker  at £1.2 billion.

The sale of House of Fraser is the latest in the list of some of Britain's iconic brands falling in the hands of foreign owners.

Rolls Royce, Gale's Honey, Cadbury, Jaguar Land Rover, Newcastle Brown Ale, Camelot – operator of the national lottery, Boots chemist chain, cycle manufacturer Raleigh, Asda supermarket chain, BAA, which owns Heathrow, Gatwick and Stansted airports, Aston Martin, fish-and-chips chain Harry Ramsden's, Harrods, The Savoy, football teams Chelsea and Manchester United, Madam Tussauds, The Body Shop and HP Sauce are some of other prominent brands to have lost their British nationality.