C.banner, the Chinese retailer behind Hamleys, said it will buy a 51% stake in the struggling department store chain from its parent Nanjing Cenbest, with £70 million changing hands in the process.
C.banner has also committed to making a significant investment into the business.
However, the sale is conditional on House of Fraser shutting stores.
The 59-strong chain, which includes two on Edinburgh’s Princes Street, will put forward a restructuring plan known as a company voluntary arrangement (CVA), which will require the approval of landlords and bondholders.
Frank Slevin, chairman of House of Fraser, said C.banner’s acquisition was “a step to securing House of Fraser’s long-term future”.
“C.banner’s investment is a vote of confidence in our prospects,” he said.
“We know that if we are to deliver a sustainable, long-term business then we need to make difficult decisions about our under-performing legacy stores.
“I am all too aware that this creates uncertainty for my colleagues in the business and so we will be transparent with them throughout the process.”
House of Fraser’s troubles came to the fore in January after it suffered a drop in sales over Christmas and started talking to landlords about reducing the size of its property portfolio.
KPMG has been drafted in to advise House of Fraser on its restructuring proposal, with the terms of the plan likely to be finalised at the beginning of June.
House of Fraser is a subsidiary of Sanpower, a Chinese conglomerate chaired by Yuan Yafei.
Mr Yuan has voiced his commitment to House of Fraser, which has 6,000 employees and 11,500 concession staff, and has been pumping millions of pounds into the retailer to keep it on an even keel.
Several household names have pursued CVAs so far this year in a bid to save costs, including New Look, Carpetright and burger chain Byron.
House of Fraser acquired Jenners department store in 2005, with the former family-owned institution changing hands in a deal worth tens of millions.
Earlier this year, House of Fraser’s other Edinburgh department store situated at the West End was sold in a deal worth in excess of £13.7 million to locally-based firm Parabola.
News of the West End store sale came just months after it was reported that House of Fraser had sold its Jenners building for £53 million to landowner Anders Povlsen.
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