Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Some 18 months ago, retail billionaire Mike Ashley bemoaned the fact that he had missed out on acquiring House of Fraser. He might be about to get another chance -- and investors in his Sports Direct should be wary. 

U.S. hedge funds have been snapping up House of Fraser bonds on the cheap as the challenges of British retail take their toll, according to the Sunday Times. As these things typically go, they may soon be looking for a buyer to unload their stake, and Ashley's an obvious candidate.

He's been struggling to convince sportswear brands to supply his cut-price athletic apparel stores with their latest top-range products. Control of an upmarket department store would offer a quick and elevated route to cement his credibility at the posh end of the market. That could have a nice knock-on effect for Sports Direct (much) further down the road.

Sports Direct can certainly afford it. The retailer has little net debt -- just 99.6 million pounds ($121.2 million) as of April 24. Its market capitalization of 1.7 billion pounds dwarfs House of Fraser's 450 million-pound selling price when it changed hands in 2014. And given challenging conditions on the high street, it could be even cheaper this time around. 

Sports Slump
Sports Direct is less valuable than when House of Fraser last changed hands in April 2014
Source: Bloomberg

The problem is, Sports Direct's in a weaker position than in 2014. When the company snapped up an 11 percent holding at that time in House of Fraser, its shares were trading at an all-time high above 900 pence, and Ashley could do little wrong.

Today they are less than 300 pence, and the company has come under fire from U.K. lawmakers for its working practices and corporate governance. The turmoil has cost the company its chief executive officer and finance director, and now Ashley's taken over the CEO role.

The strains at Sports Direct mean that a big purchase right now would not go down well with minority shareholders. Ashley's already got a lot on his plate.

But Ashley is not only the controlling shareholder, with 55.6 percent of the shares, he's a gambler too. And with a question mark over the ownership of House of Fraser arising once more, he might just be tempted to roll the dice. Minority investors should take note.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andrea Felsted in London at

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