In a stock market announcement, Sports Direct said it has acquired all of the UK stores of House of Fraser, the brand and all of the stock in the business.
Some 17,000 staff are being informed that they will be transferred over from House of Fraser to Sports Direct.
The deal was struck through a pre-pack administration process, where a company is put into administration before a new buyer cherry picks the best assets.
The tycoon beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill.
It is understood that Mr Day’s proposal was in excess of £100m, would have avoided an administration and included House of Fraser’s pension scheme.
However, accountancy giant EY, which was overseeing the process, opted for Mr Ashley’s offer.
Sources said that Mr Ashley will now begin the process of turning some House of Fraser stores into Sports Direct outlets and rebrand others under the Flannels fascia.
Prior to its collapse, Mr Ashley had held an 11% stake in the department store chain.
The deal will see the Newcastle United owner tighten his grip over the British high street, adding to his sports retailing and “premium fashion” empire.
The billionaire has also built up stakes in rivals such as Debenhams, Goals Soccer Centres and French Connection.
House of Fraser was plunged into crisis last week after C.banner, the Chinese owner of Hamleys, pulled its investment into the troubled retail chain.
C.banner was planning to buy a 51 per cent stake in House of Fraser and plough £70m into the ailing retailer, but then scrapped the move.
Like other retailers, House of Fraser has been stung by soaring costs and falling consumer spending power.
The company saw its business rates bills rise £3.99m to £30.24m this year following a Government revaluation, according to research group Altus.
Richard Lim, of Retail Economics, said: “The combination of rapidly rising costs against a backdrop of seismic shifts in the way we all shop is pushing traditional business models to the brink.
“The race is on to pivot business structures fast enough to be fit-for-purpose in today’s digital world.
Criticism has also been levelled at House of Fraser’s former Chinese owner, Yuan Yafei’s Sanpower
“Individual circumstances need to be accounted for. The demise of House of Fraser in many ways has been the result of poor leadership, paralysis in innovation and crippling levels of debt,” Mr Lim added.