Frasers defends insolvency deals after MatchesFashion collapse
The owner of Sports Direct, House of Fraser and Flannels has faced scrutiny over its strategy of buying distressed companies, such as MatchesFashion, and swiftly placing them into administration.
Critics say putting companies into insolvency so soon after a takeover suggests a lack of genuine commitment to turn around those businesses, and is a means of asset-stripping: acquiring intellectual property while shedding liabilities such as creditor debts, stock, leases and staff. Others argue that Frasers is the only retail company trying to save failing businesses and the high street.
Chris Wootton, Frasers' chief financial officer, branded criticism of its strategy as 'unfair'. He said: 'A lot of what we acquire is very, very distressed businesses that are bankrupt.'
Wootton added: 'Without us saving them there has to be efficiencies found because … that's why they went into bankruptcy in the first place.
'We feel we can turn these businesses around and make them successful by bringing them into the Frasers Group ecosystem. We're very good at it and we've done it multiple, multiple times.'
Ashley founded the retail empire in 1982 with a sports shop in Maidenhead. The group, which rebranded from Sports Direct to Frasers after acquiring the eponymous department store chain in 2018, now employs more than 32,000 people.
Mike Ashley founded the retail group with a sports shop in Maidenhead
CHRIS J. RATCLIFFE/BLOOMBERG/GETTY IMAGES
Frasers has scaled up by buying troubled retailers at bargain prices, including House of Fraser, Jack Wills, Sofa.com, Evans Cycles and Missguided. In several cases it has ended up restructuring or liquidating them soon after.
The swift administration of MatchesFashion after its acquisition raised particular concern about the group's intentions. Frasers bought the Matches brand name and intellectual property for £19 million in a pre-pack deal in April last year. The transaction excluded £80 million worth of stock and the 250 remaining employees and came just a month after Matches had been placed into administration, with Frasers saying 'too much' would be required to save it.
Nick Beighton, the former chief executive of Matches, called the move 'unnecessary' and insisted that the business could have been turned around. The deal drew criticism from brands, creditors and employees for both its timing and impact.
Wootton defended the decision: 'Matches was a massively lossmaking business [and it] went into bankruptcy. We went in with our eyes open that it was going to be difficult to turn around and it proved to be. It wasn't like we went in with our eyes closed. We knew what would happen and ultimately we took a very quick decision to put it back into administration because we didn't feel we could, you know, turn it around successfully.'
He said Frasers was 'constantly looking at where we can grow', including further acquisitions.
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