House of Fraser heads to China

The British chain of department stores has agreed to be taken over by Chinese conglomerate Sanpower.

House of Fraser, the 165-year-old chain of department stores, has agreed to be taken over by a Chinese conglomerate for £450m. Sanpower, a retail, technology and real estate group headed by multimillionaire Yuan Yafei, is to take an 89% stake in the chain. It marks China's biggest investment in a UK retailer.

But it emerged early this week that Sports Direct boss Mike Ashley, who has been eyeing up House of Fraser for some time, has prevented the Chinese taking full control by snapping up an 11% stake. He has reportedly failed to buy out other shareholders, however, and is thought to be willing to sell his stake to Sunpower.

What the commentators said

Not only will the famous brand boost his sales in China, but Chinese firms involved in both retail and real estate can use established brands to help them secure better property deals mall owners wanting to cash in on House of Fraser's cachet will offer better terms.

More broadly, the deal is crucial to expanding Sunpower overseas and learning how to manage international brands, noted Andrea Felsted in the FT. A small Israeli acquisition has hitherto been the group's only foray abroad.

Many will bemoan yet another UK company falling into Chinese hands, said The Daily Telegraph. But it's been a long time since House of Fraser could truly be called British. In 1985 it was bought by Harrods boss Mohamed Al-Fayed; in 2006 it was taken private by Baugur, the Icelandic retailer that collapsed two years later. Now the brand is heading to a huge new market with a growing middle class "the retailer's target audience".

The good news is that Yuan is described as a "forthcoming" and smart" leader, said the FT's Duncan Robinson. He will need to be "to sell the venerable brand to savvy Chinese shoppers".

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