25th Feb 2022 16:31
(Alliance News) - Frasers Group PLC said Friday it has acquired Studio Retail Ltd, the main operating business of Lancashire-based Studio Retail Group PLC, for GBP26.8 million in total.
On Thursday, Studio Retail had appointed Daniel Butters and Daniel Smith of Teneo Financial Advisory Ltd as joint administrators, to set up advanced talks for the sale of the group's business and assets. As a result, Studio Retail's shares were cancelled from the London Main Market at Friday's open.
Frasers was a 29% shareholder in Studio Retail Group.
The appointment of administrators followed a failed financing attempt to raise additional working capital needed to fund the company as it tried to sell off surplus stock. Studio Retail had requested a short-term loan of GBP25 million from its lending banks to fund the surplus stock on January 31.
Frasers said that it was of the opinion that this loan would be a "gross underestimation of the scale of the issues facing the business" and insufficient to preserve the group.
The company added in a statement that Studio Retail was an example of a business which had "buried its head in the sand whilst the world around it changed". Furthermore, the company continued, it was clear that the fundamentals of its business were, "at best inadequately scrutinised by its board and/or advisors to the business, or at worst, deliberately concealed as the business entered its death spiral".
Frasers - which owns the Sports Direct, House of Fraser and Flannels chains - will pay the consideration in cash, and release Studio Retail from its liabilities to lending banks under its revolving credit facilities.
Frasers also will act as guarantor in respect of some payments into the Studio Retail group pension scheme.
"The administrators are of the opinion that the transaction was in the best interests of the company's creditors as a whole. In addition, while Studio Retail Ltd itself was not in administration, it had temporarily ceased taking orders and the transaction will allow trading operations to resume, ensuring continuity for suppliers, the group's over 1500 employees, pension holders and customers," Studio Retail Group stated.
Frasers said that it does not see the failures of listed companies such as Debenhams, Goals and Studio Retail Group as isolated incidents but rather as "manifestations of systematic governance failures and a lack of corporate and individual accountability". It urged the UK government to increase regulation of UK business.
Shares in Frasers Group, which is 65% owned by Mike Ashley, ended up 2.8% at 638.50 pence on Friday in London.
By Heather Rydings; [email protected]
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