Icelandic investment firm Baugur has finished its examination of House of Fraser’s books and is poised to make a formal offer for the UK department store chain at 148p per share. Such a bid would value the firm at £351m (US$600m).
Baugur was keen to investigate HoF’s £105m pension deficit before committing to making an offer. In March, talks between HoF and private equity group Apax Partners were terminated without an offer being made.
The due diligence process has progressed smoothly this time by all accounts. House of Fraser’s board is expected to recommend a formal offer from Baugur. House of Fraser’s market capitalisation is currently £317m (US$600m).
Baugur is leading a consortium of investors that is understood to include the bank that will provide the majority of debt financing for the deal, reportedly HBOS. HBOS declined to comment.
In April, Baugur took a 26% stake in UK garden centre group Wyevale as part of a consortium that included Tom Hunter’s investment vehicle West Coast Capital and HBOS, which took on 19.9% using its Uberior subsidiary. HBOS provided a £419m bridging loan to finance the deal.
In June last year, the same three parties united to acquire LXB properties, the UK retail and supermarket investor, in a deal also financed by HBOS.
In the past year, Baugur has also used other, predominantly Icelandic, financial institutions as debt providers, which have then gone on take to take a significant stake in the acquired company.
In November 2005, Icelandic bank Landsbanki provided debt and took a stake in MW Group, the holding company of UK jewellery retailer Mappin & Webb. In July 2005, Baugur led the consortium that acquired UK retailer Jane Norman. Baugur acquired a 39.5% stake in the business, and Icelandic bank Kaupthing took on 32.5% in the deal, which was partly financed by Kaupthing.
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