Arcadia Group fate hangs in the balance amid conflicting reports of rescue

Suban Abdulla
·4-min read
LONDON, ENGLAND - NOVEMBER 27: A general view of Topshop's flagship store on Oxford Street today on November 27, 2020 in London, England. British fashion empire Arcadia, which owns Topshop stores, announced Friday it was evaluating several "rescue options" to save its brands after media reports suggested an imminent bankruptcy attributed to the coronavirus pandemic. Bankruptcy of the group, which has 13,000 employees and more than 500 stores, would be a thunderclap in British commerce, already hit hard by the health crisis and the rise in online shopping. (Photo by Karwai Tang/WireImage)
Arcadia's popular high street brands have been making losses. Photo: Karwai Tang/WireImage

Retail tycoon Mike Ashley has shown an interest to take over Sir Philip Green’s Arcadia Group, which is on the brink of administration with 15,000 jobs on the line.

Ashley, who is founder and boss of Sports Direct, reportedly offered Arcadia a £50m ($66.5m) lifeline. According to Sky News, Frasers Group has drawn up plans for an emergency loan to Arcadia just hours before its board appoints administrators.

Frasers' chief financial officer, Chris Wootton, was quoted on Saturday by Sky News as saying: “We hope that Sir Philip Green and the Arcadia Group will contact us today to discuss how we can support them and help save as many jobs as possible."

But, conflicting reports on the rescue emerged on Sunday as a senior source told the BBC that Arcadia could “collapse within hours” as the group does not expect an 11th hour rescue deal. Arcadia Group could enter administration as soon as Monday, the source said.

The company insider also dismissed reports that Ashley offered £50m loan to the group saying: "If this was about £50m we could find that in five minutes."

The source told BBC’s business editor Simon Jack: "This is obviously a sad day, we tried to save it a year ago when £200m was put into the business and the pension fund, but it's impossible to operate now.

"You don't know when you'll be open, you don't know what stock to buy.”

READ MORE: Philip Green's retail empire 'could collapse in days' with 15,000 jobs at stake

The Sports Direct boss, who runs Frasers Group Plc (FRAS.L), told ITV News that he’s interested in all of the brands owned by Arcadia Group, including clothing retailers Topshop, Topman, Dorothy Perkins and Burton.

The offer could intensify the rivalry between the retail tycoons. Last year, Ashley told the Times newspaper that he wouldn’t buy Arcadia Group for even one pound.

The company’s popular high street brands have been making losses. Arcadia also has debts, the pension scheme is in deficit and the business is running out of the cash it needs to keep going.

One of the options under consideration is a light-touch administration, where the existing management remains in place under the supervision of the administrators, according to people familiar with the matter.

Consultancy group Deloitte is reportedly being lined up as administrator.

READ MORE: Arcadia troubles threaten Debenhams-JD Sports rescue talks

On Friday it was revealed that Green’s retail empire could face collapse “within days.”

While a company spokesperson confirmed the business was working on “contingency plans” but did not directly comment on whether it was preparing for administration.

Arcadia has been hit by COVID-19 and subsequent lockdowns, which have hammered it’s sales. It made around 500 head office job cuts earlier this year, as it was hit by the first lockdown. It also paused monthly payments to its pension scheme during the first wave but has since resumed them.

The former owner of collapsed BHS has also furloughed more than 14,000 of its staff.

Green had been seeking a £30m loan to shore up the company earlier this month, but talks with potential lenders are said to have failed.

“The forced closure of our stores for sustained periods as a result of the COVID-19 pandemic has had a material impact on trading across our businesses,” an Arcadia spokesperson said on Friday.

“As a result, the Arcadia boards have been working on a number of contingency options to secure the future of the group’s brands. The brands continue to trade and our stores will be opening again in England and ROI as soon as the government COVID-19 restrictions are lifted next week.”

Earlier this month, Ashley withdrew from acquiring Debenhams, after refusing to match the £300m price tag. It is currently in exclusive talks with JD Sports (JD.L).

The struggling department store retailer has recently filed for an insolvency process which has allowed it to continue operating while it seeks a buyer or additional funding.

Yahoo Finance has reached out to Frasers Group for comment.

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