Mike Ashley’s Frasers Group has acquired the department store chain Harvey Nichols through a pre-pack administration covering about 1,000 jobs, the retailer’s six UK stores and its online and international franchise operations, according to administrators FTI Consulting.

FTI said the deal “safeguards a 200-year-old institution”.

Frasers, the FTSE 100 retailer, said it would begin a “significant restructuring” of Harvey Nichols to “right-size the business” and return it to profit. It said it would integrate the chain into the group and review and “rationalise” the store portfolio, organisational structure, operating model and cost base.

Michael Murray, chief executive of Frasers and Ashley’s son-in-law, said: “The turnaround will require tough choices, and we are prepared to make those decisions, even if that means a smaller business in the near term, to create a stronger and more sustainable Harvey Nichols for the long term.”

The deal follows a sales process in which Frasers beat Next, the London-listed retailer, to take control of the business.

Harvey Nichols had warned in its latest accounts that it would need to “cease trading” within a year if it failed to secure new investment. Ashley has said the chain was in a “death spiral”.

Harvey Nichols has not made a profit since the pandemic. It has been squeezed by online competition, high costs, under-performing regional stores and weaker spending from international tourists. Rivals including Harrods and Selfridges have invested heavily in their shops and online businesses.

The six UK stores are in Knightsbridge in west London, Manchester, Birmingham, Bristol, Leeds and Edinburgh. Harvey Nichols has 13 shops globally, including seven locations in the UK and Ireland. Frasers said it had acquired some assets at the Dublin store, including stock and store fixtures, and that talks over that business continue.

The Oxo Tower restaurant on London’s South Bank, which Harvey Nichols has operated since 1996, has been sold separately to the team behind Fallow. FTI said this would preserve more than 100 jobs and the operations of the business.

Lindsay Hallam, senior managing director at FTI Consulting, said: “From the outset, our focus was to find a solution that protected the underlying value of the business, securing a future for a 200-year-old retailer, and delivering the best possible outcome for stakeholders.”

The acquisition deepens Frasers’ push into upmarket retailing, and the group said it hoped to expand its relationships with luxury brands including Gucci, Moncler, Burberry, Prada and Dior. Murray has previously warned of a softening global luxury market as sales in the group’s premium division fell.

Louise Déglise-Favre, lead apparel analyst at GlobalData, said Frasers had “spent several years constructing a luxury proposition that it has been unable to fully realise”.

She added: “While Flannels provided scale, and the group’s shareholdings in Mulberry and Burberry provided proximity to brands, the houses that define genuine luxury have remained reluctant to trade within a Frasers fascia.”

Déglise-Favre said the outcome of the deal was likely to be a “more concentrated luxury proposition centred on Knightsbridge, with weaker stores absorbed under the other fascias within the group, such as House of Frasers or Flannels”.

The position of Harvey Nichols creditors, including suppliers, landlords and HM Revenue & Customs, is unclear.

Lisa Webb, senior lawyer at Which?, said: “Fraser’s Group must ensure that existing obligations to Harvey Nichols’ customers are honoured if it wants to maintain goodwill in the brand. That means accepting gift vouchers, fulfilling online shopping orders and processing returns and refunds as if nothing has changed. No consumer should be left out of pocket as a result of this sale.”

A pre-pack involves lining up a buyer ready to acquire a business straight after it enters administration. Supporters say the structure is an efficient way to rescue struggling businesses, save jobs and maximise returns to creditors, while critics say it can leave creditors with unpaid debts. Sales to connected parties are subject to mandatory independent scrutiny under 2021 regulations, a regime insolvency professionals warned at the time could remain open to abuse.

Frasers has acquired a number of distressed brands through pre-packs. The company was renamed from Sports Direct in 2019 after Ashley bought House of Fraser. Ashley stepped down as chief executive in 2022 but remains majority shareholder.

Shares in Frasers closed up 13p, or 1.6 per cent, at 817½p on the London Stock Exchange following the deal, valuing the company at £3.6 billion.