Ashley buys House of Fraser ... but WON’T foot bill for pensions of 10,000 workers
‘Opportunity to do the good thing’
BILLIONAIRE Mike Ashley was last night under fire for dumping the pensions of 10,000 House of Fraser workers in a deal to snap up the department store chain for £90million.
The tycoon, who owns Sports Direct, bought the 169-year-old business after it went bust having failed to agree a rescue deal and immediately pledged to turn it into the Harrods of the High Street.
The agreement removes an immediate threat to 17,000 jobs and is expected to result in fewer of House of Fraser’s 59 stores closing.
However, as part of the takeover, the retirement savings of 10,000 workers will be put in the Pension Protection Fund lifeboat scheme where they face cuts of up to ten per cent.
And it left shoppers with House of Fraser gift vouchers unable to use them.
Last night Mr Ashley pledged to transform the firm, adding: ‘We will do our best to keep as many stores open as possible.’ But Work and Pensions Committee chairman Frank Field said: ‘I think that Mr Ashley should have to take on the pension liabilities and I want the pensions regulator to force him to do so.’
He also urged the tycoon to learn from the BHS debacle, when Sir Philip Green sold the chain for £1 in 2015 and it went bust a year later, leaving 11,000 jobless and a pension deficit of £571million. Green has since agreed to put £363 million into the BHS pension schemes.
Mr Field added: ‘There is much to be gained from Mr Ashley to behave in contrast to the way Sir Philip Green behaved to BHS pensioners. It’s an opportunity for him to do the good thing without a great deal of cost and it would protect pensioners.’
House of Fraser was founded in Glasgow by 1849 by Hugh Fraser. It became Britain’s biggest chain but has struggled with a change in shopping habits amid pressures from high business rates.
In 2014 the chain was bought by Chinese firm Sanpower for £480million. But it ran into a cash crisis this year and looked for a rescue deal. Then Chinese conglomerate C.banner pulled out of rescue plans. That left bosses at House of Fraser scrambling to plug a multi-million pound black hole by August 20. This week, Mr Ashley, rival retail tycoon Philip Day and others were said to be in talks – but a deadline for offers passed on Thursday.
Less than 24 hours later, administrators at EY were called in and soon afterwards it was announced Mr Ashley’s Sports Direct was buying House of Fraser’s stores, stock and brand for £90million.
The tycoon, who owns Newcastle United, is not expected to keep all 59 of the chain’s stores open.
Meanwhile, the Pension Protection Fund (PPF) has been left to find a buyer for the chain’s pension scheme. It has a surplus of £20million, meaning it will not have to be bailed out. But if a private firm rescued it, it would likely demand an investment of £170million. Without this, the fund would fall into the PPF and former staff would receive up to ten per cent less than they were promised.
John Ralfe, independent pension consultant, said: ‘The good news is that pension scheme members are covered by the PPF and the scheme is well funded. The bad news is that even this higher level will be less than the full pension members were expecting.’
Baroness Ros Altmann, former pensions minister, warned House of Fraser pensioners could be left with less than former BHS staff. She added: ‘It’s important employers do not just feel they can walk away from their pension liabilities, but as it stands the system prioritises jobs and creditors over the rights of pensioners.’
In addition to sportswear and fashion brands, such as Flannels, Mr Ashley holds stakes in Debenhams, Goals Soccer Centres and French Connection. It is thought he will turn some House of Fraser stores into Sports Direct outlets.
Mr Ashley, who founded Sports Direct in 1982 and has a £2.4billion fortune, said: ‘This is a massive step forward and further enhances our strategy of elevation across the group. We will do our best to keep as many stores open as possible. My ambition is to transform House of Fraser in to the Harrods of the High Street.’