• C. Banner International has signed an MoU with House of Fraser owner Nanjing Cenbest over a potential acquisition of a 51% stake in the UK department store retailer. 
  • The MoU is not legally binding and will be valid until 30 September 2018.
  • C. Banner International designs, manufacturers and sells branded women's footwear in China, and toys globally through its Hamleys chain.
House of Fraser is owned by Chinese conglomerate House of Fraser

House of Fraser is owned by Chinese conglomerate House of Fraser

House of Fraser has entered into talks with Chinese retail group and owner of Hamleys, C Banner International, over the potential purchase of a 51% stake in the struggling UK department store retailer.

C. Banner International, which designs, manufacturers and sells branded women's footwear in China, and toys globally through its Hamleys chain, has signed a Memorandum of Understanding (MoU) with House of Fraser owner Nanjing Cenbest, a Shanghai-listed department store chain controlled by Sanpower Group.

Sanpower bought the chain for GBP480m (US$669.9m) in 2014, promising an expansion of the brand across China.

However, the retailer has struggled in a competitive market reporting "disappointing" Christmas sales in January. It has also had credit insurance pulled from some of its suppliers. Earlier this month, Sanpower injected GBP30m of cash into the department store chain to ease the group's strained finances.

C. Banner says an acquisition of House of Fraser would enhance its influence in the retail market in China, as well as facilitate the company to "lay a good foundation" for a new brand and retail roadmap overseas.

"The directors believe the possible acquisition (if proceeded with) will create synergies between [House of Fraser's] department store business and the group's existing footwear and toy retail businesses, thereby enhancing the competitive strength of the company in the retail industry," it added in a statement yesterday (24 April).

"The acquisition... would mark an important step towards the implementation of [C.Banner's] global branding strategy, which leverages the brand recognition effect of world-renowned brands."

C. Banner says the parties will continue to undertake "amicable negotiations … on an arms length basis", and that any acquisition will be paid in cash.

The MoU is not legally binding, save for certain provisions relating to confidentiality, governing law, dispute resolution, validity period and other miscellaneous matters, and will be valid until 30 September 2018.

In its notice, C. Banner emphasises that no legally binding agreement has been entered into and that any potential acquisition is subject to, among other things, due diligence review on the assets, liabilities, operations and financial and legal affairs of House of Fraser by the company to its satisfaction.

"The possible acquisition may or may not proceed and the final structure and terms of the possible acquisition, which are still subject to further negotiations between the parties and the target company, have yet to be finalised and may deviate from those set out in the MoU," it added.

House of Fraser has been undergoing a transformation plan, which is working to find GBP26m in annual savings, as the retailer looks to become more agile and customer centric. This has seen a consolidation of its suppliers, a move to a single stock pool to service the retailer's multichannel business and the leveraging of technology outsourcing partnerships. 

Earlier this year, House of Fraser finalised the terms of the sale of the brand names no longer used in the UK to Guangzhou Sunrise Trading Limited for a cash consideration of GBP30m (US$40.5m). The move was aimed at refocusing on core brands like Biba, Linea, and Issa. While there was speculation last week the company was considering a company voluntary arrangement — an insolvency process to cut rents and shut stores.