Sir Tom looks to take control of Jenners

Published on Wednesday 4 February 2009 20:18

THE Scots entrepreneur Sir Tom Hunter is understood to be considering upping his stake in House of Fraser, owner of Jenners, following the collapse of Icelandic investor Baugur, which owns 35 per cent of the firm.

The move would see Sir Tom take a 45 per cent stake in the retailer – enough to allow him to essentially take control of the company, in which he currently has a 10 per cent shareholding.

Baugur, which also has holdings in retailers such as Hamleys and a group of fashion chains including Jane Norman and Karen Millen, has applied to enter the "moratorium" process in Reykjavik. The move offers protection from creditors in a similar way to Chapter 11 bankruptcy procedures in the United States.

The collapse came after talks failed between Baugur and its banks over the firm's 1 billion debt burden.

Experts believe the process is likely to include a fire sale of most of Baugur's UK assets as it attempts to generate cash – leaving the UK high street open to a major shake-up. However, analysts believe a sale could be an advantage to House of Fraser, which has vowed that Baugur's collapse will have no impact on the running of the business.

It is thought some assets of the Baugur empire are likely to be snapped up at a discount price by private equity firms such as Alchemy or the retail tycoon Sir Philip Green, owner of Arcadia, which includes chains such as TopShop and Miss Selfridge.

Nick Hood, a partner at the accountancy firm Begbies Traynor, said: "This could potentially be good news for Baugur's retail investments, which have been grappling with the uncertainty of having a significant but unstable shareholder."

Baugur's 35 per cent holding in House of Fraser was worth an estimated 100 million when the Highland Acquisitions consortium – made up of Baugur, Sir Tom and a number of other investors, including House of Fraser chairman Don McCarthy – bought the chain for 351 million in 2006.

But analysts said it could now be sold off at a "highly discounted price" due to the plummeting retail sector and the three-week court deadline to find a resolution for the business.

Mr Hood added: "A lot of private equity firms did not bite when opportunities like USC and Adams came up around Christmas time. My guess is they were keeping their powder dry for this exact kind of thing – to snap up some bargains in the Icelandic sale.

"Sir Tom Hunter will clearly be interested. He is a very patriotic guy and Jenners is an important part of House of Fraser. An extra 35 per cent stake will give him, for all practical purposes, control of the company."

A source yesterday told The Scotsman that Sir Tom, who has seen an estimated 250 million wiped off his fortune as a result of the economic downturn, was "seriously considering his options" over House of Fraser – as well as Baugur's 15 per cent share of the garden centre chain Wyevale, in which he already holds a 25 per cent stake.

Sir Philip has previously shown interest in some of the other brands owned by Baugur, but yesterday said it was too early to consider making a bid any of the assets. "We have not yet been offered anything from Baugur and will not even consider it until we are," he said.

Ewan Hunter, spokesman for Sir Tom's West Coast Capital investment vehicle, said:

"We are not commenting at the moment on whether it is likely we would consider buying the stakes, but we would also not rule it out."

Department store chain with roots in Scotland

HOUSE of Fraser began life in the 19th century when Hugh Fraser and James Arthur set up a small drapery shop on the corner of Argyle Street and Buchanan Street in Glasgow.

Once listed on the Stock Exchange in 1948, the department store chain expanded rapidly, making acquisitions throughout the UK and eventually snapping up the family business Jenners in 2005.

A year later, House of Fraser, which now boasts about 60 stores in the UK and Republic of Ireland, was delisted and sold in a 351 million deal to Highland Acquisitions – a consortium made up of Baugur, Sir Tom Hunter and a number of other investors, including Icelandic private equity firm FL group.

Baugur holds a 35 per cent stake in House of Fraser, while Sir Tom has a 10 per cent holding and the now-nationalised Icelandic bank Glitnir nurses a near 14 per cent stake in the company.

If Sir Tom, who made his fortune selling Sports Direct to JJB, were to buy Baugur's stake he would effectively take control of House of Fraser.

The chain has four branches north of the Border – the main Jenners store, two shops in Edinburgh and Glasgow and a Jenners-branded outlet in Dunbartonshire.