French fashion chain in House of Fraser talks

Jenners department store in Princes Street. Picture: TSPL

House of Fraser (HoF), which also has Scottish retail billionaire Sir Tom Hunter as a significant minority shareholder, is said to be looking for a price tag of at least £450 million, according to industry sources.

“There are currently talks between the two companies,” one source said. At the same time the British department store group is believed to be continuing with preparations for a flotation on the London Stock Exchange early next year.

It is understood family-controlled Galeries Lafayette, which has 65 stores, has exclusivity on the talks with 160‑year‑old HoF until the end of January.

The British group, which has 61 stores in the UK and Ireland, has annual sales of about £1.2 billion, but has struggled in recent years.

It has spent almost a decade under private ownership, but has weighed a return to the stock market after previous attempts at a trade sale foundered.

The company made a loss before tax and exceptional items of £6.9m in the year to 26 January, 2013, ending the period with net debt of £157.2m and a pension deficit of £46.9m.

It is believed to have held recent informal takeover talks with both Sports Direct tycoon Mike Ashley and the Qatari royal family before setting its sights on a return to public ownership.

HoF first listed on the stock market in 1948 and remained a public company until it was bought by Mohamed al-Fayed in 1985.

It was listed again in 1994 before being snapped up in 2006 by a group of investors led by Icelandic magnate Jon Asgeir Johannesson’s Baugur Group in a £350 million deal.

HoF has a complicated ownership structure, with 49 per cent of the equity of holding company Highland Group Holdings owned by Icelandic banks Landesbanki and Glitnir.

HoF chairman Don McCarthy owns 20 per cent and Hunter holds an 11 per cent stake. Fellow retail entrepreneur Kevin Stanford has 9 per cent while Lloyds Banking Group owns 5 per cent and other management 6 per cent.

A spokesman for Hunter declined to comment.

Galeries Lafayette, faced with weak consumer spending in its French home market, has been rolling out upmarket department stores in international capitals to target customers with money to spend in emerging markets.

The company now has stores in Jakarta, Beijing and Dubai, with total group revenues of €2.3 billion.

Some remain sceptical of a successful trade sale or flotation of HoF, however. Nick Bubb, an independent retail industry analyst, said both options “may be rather fanciful hopes”.

Bubb said it was hard to tell whether the latest development was “a masterstroke or a desperate last throw of the dice, after all other solutions to the distressed balance sheet and shareholder base have failed”.

HoF was established in Glasgow in 1849 as Arthur and Fraser. Over the years other famous department stores acquired by the group have included the Army & Navy Stores, Barkers of Kensington, Beatties, Dickins & Jones, Howells and Harrods of Knightsbridge, now owned privately.