Blog: Leonie BarrieThe battle for Baugur

Leonie Barrie | 16 October 2008

The battle for Baugur seems to be hotting up, with several new bidders thought to be lining up alongside British retail tycoon Sir Philip Green to snap up the Icelandic investor’s debt – which The Financial Times believes to be in the region of GBP1-2bn.

The latest twist in the story suggests that Green is still the frontrunner though, with news reports putting the billionaire in the Icelandic capital Reykjavik yesterday where he was said to be locked in talks with Baugur Group chairman Jon Asgeir Johannesson.

But equity groups TPG, Permira and Alchemy are also believed to be lining up their own deals, and it’s not inconceivable to think the chains’ own management will be trying to mount their own bids as well – if they can get the finance together.

All of which puts pressure on Green, who had been hoping to nail the deal in the next couple of days and seize the controlling stake in fashion chains such as Whistles, Jane Norman, Oasis, Warehouse and Karen Millen for a bargain basement price.

Whether he’s interested in other Baugur assets like department store retailer House of Fraser and its non-clothing businesses like Iceland, the frozen food chain, and iconic toy store Hamley’s is also open to speculation. Expanding his fashion empire would give him huge control of the British high street, but he may well have visions of expanding his reach into other markets as well.

A price war between investors for all or parts of the Baugur empire is an exciting – and until about a week ago in the current financial climate, unbelievable – prospect.

But identifying who exactly owns the Baugur companies, with their debt woven across several different banks and investment vehicles now controlled by the Icelandic government, could be one of the biggest hurdles facing potential investors.

As could the difficulty in getting funding for any deal. Here Green is way ahead of the pack, with a personal fortune estimated at around GBP4.5bn that gives him a better negotiating position than most of his rivals.

 

UK: Private equity firms join Baugur rescue race


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