Sanpower, a Nanjing-based conglomerate listed on the Shanghai Stock Exchange, will acquire an 89 per cent stake in the 165-year-old British brand through its Nanjing Cenbest subsidiary.
Sanpower's founder and chairman, Yuan Yafei, said the deal was the largest overseas acquisition in the retail sector by a Chinese business, and a "landmark transaction".
He expressed his intention to expand House of Fraser overseas, particularly in China. The group currently has 60 stores across Britain and Ireland and one in Abu Dhabi.
"The management team has done an incredible job moving this business from a traditional department store to a recognised premium branded fashion retailer with a first-class multichannel offering.
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"We have always been looking to invest in strong brands like House of Fraser, and take them to the next level of growth."
The British company's executive chairman, Don McCarthy, said the takeover opened an "extremely exciting chapter". He will be stepping down once the deal is completed.
The company, which went private in 2006, said it did not expect any day-to-day changes for the 7,300 company and 12,000 concession staff in its stores.
In the statement, House of Fraser also confirmed reports that Mike Ashley, the founder of retail group Sports Direct and owner of Newcastle United football club, was trying to buy an 11 per cent stake.
It said that if the deal goes ahead, the new shareholder "loses the right to a board position", suggesting that Ashley would have no say in the company's strategic direction.