Leading UK department store group House of Fraser on Friday rejected a surprise £197 million offer from Scottish retail entrepreneur Tom Hunter.

It said the 85p a share offer, which Hunter made through TBH Investments, was not enough and hit out at the timing of the bid which it said was aimed to "cause maximum disruption during the Christmas trading period".

The 41-year-old has already won the backing of Icelandic retail giant Baugur which holds an eight per cent stake in the group while TBH has a 4.7 per cent stake in the retailer.

Hunter said House of Fraser was in need of substantial long-term investment. "We are prepared to make that investment but it will take time to make the changes and for its performance to improve," he said. That process is best done as a private company, particularly in the current retailing environment."

But House of Fraser said in a statement it is "firmly of the view that this indicative offer does not reflect the value of the company's business, assets and its prospects".

It added: "Furthermore, the board believes that this approach has been timed to cause maximum disruption during the Christmas trading period, which cannot be in the best interests of House of Fraser shareholders."