The agreement entails Sanpower obtaining an 89 percent stake in House of Fraser (HoF), with an terms of the deal and a formal announcement of the takeover said to released later this week.
However, over the weekend it emerged that Sports Direct founder Mike Ashley had acquired the remaining 11 percent stake of the group, after striking a deal with Scottish retail entrepreneur Sir Tom Hunter. West Coast Capital, the investment group owned by Sir Hunter confirmed the sale of its stake in HoF to Sports Direct on Sunday.
Mike Ashley obtains 11 percent stake in HoFSir Hunter reportedly told the Telegraph that he sold his 11 percent stake in HoF to Ashley because, "Sports Direct offered us the certainty of cash now, over a highly conditional offer from the Chinese." The stake which Ashley acquired is valued at 50 million pounds, but would not give him a seat on HoF executive board. Now a legal dispute has now come to light as the department store group threatens legal action against Ashley and Sir Hunter.
HoF states the pre-emption rights which are attached to stake should have led Sir Hunter to offer his shares to the group's existing shareholders prior to striking a deal with Ashley, an outside investor.
A group spokesperson from HoF commented on the deal: "We have sent legal letters to both parties, reminding them of the proper procedures to transfer shares, which have not been followed. This situation has no impact on our plans to sell to Sanpower Group and we will be making an announcement in due course."
Despite the threat of legal action, Sir Hunter remains comfortable in his current position, noting "We have received the letters, our lawyers have responded and we are entirely comfortable with our position." He maintain that he followed the rules of pre-emption rights and offered his shares a number of times of HoF other shareholders, most recently to its chairman Don McCarthy.
Sources close to the matter have noted that if HoF exercises its pre-emption rights or its 'drag and tag provisions' to force Ashley to sell his 11 percent stake to Sanpower, then the Sport Direct founder will ask for a premium from the Chinese conglomerate.
An official announcement of the deal between HoF and Sanpower is expect to be made by Tuesday, as Monday is public holiday in China.