Ever since Scottish entrepreneur Tom Hunter had his £197m bid for UK department store chain House of Fraser rebuffed in December 2002 investors have been awaiting the next approach. Now after spending several months considering a possible offer, Apax Partners is understood to have made an approach.
According to industry sources, House of Fraser management may also be thinking about a private equity-backed management buyout. Among other potential bidders, Permira is in the frame, and mid-market firms such as HgCapital and PPM Capital have been mentioned.
House of Fraser said on February 24 that it had been approached regarding a potential takeover bid. It is believed that House of Fraser’s admission of an approach was forced by the Takeover Panel in response to share price movements. It is thought that the two parties have held talks, but that they were at an early stage.
A £300m (€440m) valuation has been widely placed on House of Fraser, but estimates vary. According to stockbroker Seymour Pierce, House of Fraser could be sold for as much as 160p per share. At the lower end of analysts’ predictions, Numis Securities believes a 110p target price more likely.
House of Fraser might attract foreign interest, including from Icelandic retail investment fund Baugur, which backed Tom Hunter’s approach in 2002, or bids from privately owned firms such as the John Lewis Partnership.
However, Debenhams, newly revamped by private equity owners, surely would be the most likely trade bidder. Debenhams is owned by a consortium of private equity firms headed by Texas Pacific Group.
Even after recently closing flagship stores such as Dickins & Jones in Regent Street and the Barkers Kensington store, House of Fraser has some well-positioned outlets, providing expansion potential.
House of Fraser’s market capitalisation is currently £276m (€405m).