Signa woes could impact Selfridges holding, as well as Frasers’ SportsCheck deal

There’s a question mark over the future ownership of Selfridges as co-owner Signa Group faces a financial crisis that has also seen its founder and top shareholder stepping back.

Signa bought Selfridges for £4 billion early last year in a joint venture with Thailand’s Central Group and the latter could in theory buy Signa’s holding if the Selfridges stake is put up for sale, several newspapers have reported. The two firms also own other department store assets including Italy’s Rinascente and Germany’s KaDeWe and it’s unclear when Central might also make further acquisitions there.

So what’s been happening at Signa? The retail and property giant has been hit hard by the rising cost of borrowing and falling property values and is facing a cash crunch. It has halted construction of a €700 million Hamburg project and a deal to sell the project to a shareholder fell through. Debt is less of a problem when interest rates are low but it can become a major headache when interest rates rise.

Last week shareholders sought to remove Signa founder Rene Benko and call in restructuring specialists. Investor Hans Peter Haselsteiner’s claims that Benko has agreed to hand over control to restructuring expert Arndt Geiwitz to try to save the business. Geiwitz is best known for his role in Galeria Kaufhof-Karstadt’s insolvency process. Neither Benko nor Geiwitz have confirmed this.

It’s believed the Selfridges stake would be an obvious choice for a sale given its high value and desirability.

Meanwhile Selfridges told The Sunday Times that it operates independently of any support from its shareholders and it’s essentially business as usual. It also said it has “ongoing and unwavering support of Central Group”. And Central also said it’s committed to all of its luxury department stores.

Central might end up absorbing the whole business but it might not be the only suitor for the other half it doesn’t yet own. Middle Eastern or Chinese investors are likely to be interested, with Saudi Arabia’s Public Investment Fund that supported Signa’s Selfridges bid likely to be in the running.

There has also been speculation that the Signa woes could have an impact on the Frasers Group acquisition of Germany’s SportScheck that was announced last month.

Signa’s SportScheck chain is believed to be on the brink of administration and with Signa having agreed to finance the chain until the deal completes, its cash problems and desire to preserve any cash it has could be an issue. Frasers isn’t expected to complete the deal until January meaning the financing needs could be significant over the next few months.

The Telegraph said that SportSckeck “management may have to call in administrators as soon as Monday”. It added that “Frasers was on Friday exploring whether the deal can be salvaged” and added that “under Germany’s bankruptcy system, SportScheck management may seek support from its British suitor to fund the administration. That would leave Frasers well-placed to gain control of the company via an insolvent sale”.

Frasers hasn’t commented on the reports and the wider Signa story includes plenty of speculation with few official comments from any parties involved.