Friday 17 August 2018 2:35 pm

House of Fraser could have been sold for £1, EY letter reveals

Jess Clark is a City A.M. news reporter covering retail and property.

Jess Clark is a City A.M. news reporter covering retail and property.

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Beleaguered department store House of Fraser could have been sold for just £1 ahead of its acquisition by billionaire Mike Ashley's Sports Direct brand, administrators EY revealed today.

The retailer saw a £14.6m drop in profits in the 13 weeks to the end of April, four months before it entered administration. Turnover also declined 7.7 per cent in that period, a letter to creditors published today by EY showed. 

The letter also states that six parties made formal offers to buy the high street chain before it was acquired by Sports Direct for £90m on 10 August. 

One potential buyer had offered to purchase the retail chain on a solvent basis for £1.

The bidder also made an offer to buy House of Fraser from an insolvency sale for £100m, but withdrew after "the party communicated that they could not justify the transaction commercially and they were withdrawing their interest".

Four other offers were rejected after it was assessed that they would generate a low recovery for creditors.

Read more: Fast fashion now fading faster?

Suppliers to House of Fraser, who are owed a total of £753m, will not be paid by Sports Direct, the BBC reported. The new owner is not legally obliged to pay suppliers anything owed ahead of 10 August, but often acquiring firms do make some payment as a gesture of goodwill.

The news comes after the department store cancelled all online orders on Thursday evening after a dispute with warehouse operator XPO Logistics.

XPO had ordered workers at its two warehouses in Milton Keynes and Wellingborough to stop working, and has reportedly refused access to Sports Direct vehicles attempting to collect stock for deliveries to shops and customers.

House of Fraser tweeted: "Due to delays with delivering online orders, we have taken the decision to cancel and refund all orders that have not already been sent to customers. All customers affected will receive an email in the next couple of days.

"Please accept our apologies for any inconvenience caused."

Read more: High Street bounces back as shoppers seek leisure and dining