Apax homes in on House of Fraser

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The Independent Online

Just three years after winning a hard-fought battle for independence, the department store revealed last night it is again on the shopping list of a serious suitor.

A rise in its share price yesterday prompted the company to issue a statement indicating it had received a bid. "The board of House of Fraser notes the recent share-price movement and announces the company has had a very preliminary approach from a third party that may or may not lead to an offer being made," it said.

Advisers close to the company refused to name the bidder, but City sources indicated that the offer is being led by Apax, the private-equity house teamed up with Barclays Private Equity and Robert Tchenguiz to buy the supermarket chain Somerfield in a £1.6bn deal.

It is understood that talks are at a very early stage. Apax has a long history of successful investing in retailers. "There can be no certainty that an offer will be made nor as to the terms on which any offer might be made," House of Fraser said. Its shares closed up 4.75p at 118p, valuing the company £279m. Traders speculated that an offer of about 140p would be welcomed by investors who are wary of the tough trading conditions afflicting shops.

At the start of the year, the retailer shrugged off rumours that it would be forced to issue a profits warning, and reported a 7.7 per cent rise in like-for-like sales in the six weeks to 7 January. It admitted business will be "difficult" in the first half of the year.

In 2003, the Scottish retail entrepreneur Tom Hunter made an 85p-a-share offer that eventually failed.

House of Fraser is Britain's third-largest department store with 53 shops. It is being advised by Dresdner Kleinwort Wasserstein, which declined to comment on the bid.

Talk of a possible takeover of House of Fraser hit the City on Thursday, with traders speculating that one of the big private-equity houses was poised to make a move.

With rivals either in disarray or, like Debenhams, working on a stock-market flotation, a private-equity house would seem to be the only plausible bidder. Debenhams is owned by a consortium of venture capitalists led by Texas Pacific Group.

Apax recently acquired the Tommy Hilfiger fashion empire, sold throughout the House of Fraser chain, in a $1.6bn ($917m) deal. Not all of Apax's deals have gone smoothly. The firm pulled out of an attempt to buy the high street retailer Woolworths in April last year after having made two cash offers for the company. It switched course after inspecting the company books, citing unspecified concerns.

Apax is one the world's largest private-equity firms. It has raised more than £20bn in funds since 1981. The company is headed by Martin Halusa from its London office. Dr Halusa recently caused a stir amongst private-equity investors when he suggested that the industry's first $100bn fund is within reach. Apax is likely to use equity from its sixth fund, a €4.3bn (£2.9bn) fund closed in July 2005, to bid for House of Fraser.

Apax was founded by Sir Ronald Cohen, who is said to be a close confidante of Gordon Brown.

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