Yuan Yafei (second from right), founder and chairman of Sanpower Group, after signing an agreement to buy an 89 percent stake in House of Fraser with Don McCarthy (second from left), chairman of House of Fraser, in London on April 3. Zhou Zhaojun / For China Daily

Founder brimming with ideas for British department store's entry to China

Sanpower Group Ltd of China, which has signed an agreement to buy a 89 percent stake in the 165-year-old British department store House of Fraser, says it will set up shops named Oriental Fraser in China.

"That benefits House of Fraser as the British market is growing slowly and limited," says Yuan Yafei, founder and chairman of Sanpower Group. "I can bring them to China."

On April 3, the Nanjing company, owner of Nanjing Xinjiekou department store, agreed on terms to take control of House of Fraser in a deal valuing the company at more than 450 million pounds ($745 million; 546 million euros) including 250 million pounds of debt.

It is the biggest international retail acquisition deal by a Chinese company.

The purchase by Sanpower, which Yuan founded in 1993, has put an end to speculation surrounding the House of Fraser, which has been looking for a buyer for more than two years. It had earlier had talks with another British company, Sports Direct, and Galeries Lafayette of France.

The deal also puts an end to House of Fraser's long expected listing plans.

"One of the main reasons for us being able to succeed with this is that House of Fraser's shareholders and managers are very confident about the Chinese market and have confidence in us," Yuan says.

House of Fraser had said that if Galeries Lafayette bought the British company, that would not help with growth, Yuan says.

"What I bring to them is the huge Chinese market."

Talking of his plans in China, Yuan says: "First of all a store will be opened in Xinjiekou business area of Nanjing, and it will be named Oriental Fraser."

The stores will then expand nationwide over five years, he says.

Sanpower employs more than 60,000 people worldwide and controls 100 companies including banking, retail, media and property, with assets worth 4.8 billion pounds, its website says.

The company's Nanjing Xinjiekou department store and other retail outlets are well known throughout China, but Oriental Fraser will highlight British style to show its difference and competitiveness, Yuan says.

"We can learn from House of Fraser ... We will introduce a modern British way of management and very high-end brands."

House of Fraser's management will be retained after the sale, he says.

"They are willing to work with me ... They are a very professional team with a lot of expertise willing to venture into the Chinese market."

House of Fraser's sales last year were worth 1.2 billion pounds and it had 7,300 people on its payroll.

John King, the company's chief executive, sees huge opportunities in the deal.

"We want to bring House of Fraser to China and build a bridge to the world. So when Chinese who know this brand come to the UK to sightsee or study, they will say 'Oh, I know this brand.

"We have been in business for 165 years. We think there are more opportunities."

House of Fraser, which traces its roots back to a small Glasgow drapery shop opened by Hugh Fraser and James Arthur in 1849, has more than 60 outlets in Britain and Ireland.

The chairman, Don McCarthy, and his family held 20 percent of voting shares, with a further 49 percent controlled by representatives of failed Icelandic banks, largely Landsbanki.

"We are really a multi-branded business because we sell lots of brands and we are a multi-channel business," McCarthy says.

House of Fraser's report for the 12 months ended Jan 26 last year said that despite an improvement in sales, it had net debt of 157.2 million pounds, compared with 163.4 million pounds in 2012.

The deal is Sanpower's first investment in British retailing.

Yuan says one reason for the speedy acquisition is that Sanpower does not need prior approval from the Chinese government because of recent rule changes.

A notice issued by the State Council late last month said rules had been relaxed for companies on reports needing to be submitted before a purchase, and the emphasis was now on accountability after a sale.

Sanpower bought Nanjing International Financial Center in 2013 and is finalizing the details of a $70 million cross-border deal to buy an Israeli healthcare company, Natali, that was arranged by an Israeli company, Infinity Group.

Yuan, 49, is a native of Feng County, Jiangsu province. Last year Sanpower Group was ranked 205th on a list of China's Top 500 Enterprises that was issued by the China Enterprise Confederation and the China Enterprise Directors Association.

Yuan plans to build 1,100 "lifestyle hubs", boasting shopping, leisure, dining and entertainment centers, in the country's biggest towns and cities over the next 10 years and has ambitions to become a Fortune Global 500 company by the end of next year.

"This deal is another indication of the warming commercial relationships between China and the UK," says Zhou Xiaoming, minister counselor of the Chinese embassy in London. "It is spring, and a spirit of cooperation is in the air. We are on the threshold of a new era of economic and commercial relationships. Never before have companies from our two countries been keener to work together."

Chinese investment in Britain over the past two years has totaled $13 billion, exceeding the total of the previous 30 years, according to Chinese government figures.

Since the start of this year, Chinese investors have been looking for investment opportunities in Britain, Zhou says.

Deals worth about 2.6 billion pounds ($4.37; 3.15 billion euros) have been signed in areas including automotive and property, bringing 10 billion pounds of Chinese investment into Britain.

Observers say that with sound cash flow, Chinese retailers, spurred by their desire to go global, are eager to introduce high-end retail to China.

Asked about competition from e-commerce, Yuan says: "It does not matter if a business is online or bricks and mortar. A good business can conquer both. I do not think people will ever stop shopping in person.

"We are not robots. Retailers will not die out. But the business model needs to change; we have to adapt to the Internet and change our ways. E-commerce accounts for more than a third of House of Fraser's sales, and we need to learn how to do it."

Zhou Heran contributed to this story.

zhangchunyan@chinadaily.com.cn

The 165-year-old British department-store House of Fraser in central London. House of Fraser will soon have a presence in China. Zhou Heran / China Daily

(China Daily European Weekly 04/11/2014 page19)