House of Fraser keeps options open as Lafayette bid looms

 

The French department store Galeries Lafayette is in exclusive talks to buy its British rival House of Fraser.

However, the UK stores group is still pushing ahead with plans to float the business next summer in case the talks collapse.

Owners of the British retailer have been looking to offload the business for more than a year but have failed to find a buyer because of huge debts and a large pension deficit. Its chairman Don McCarthy, is understood to have secured exclusive talks with the French department store rival, which will expire by the end of January.

House of Fraser has also appointed Rothschild in the past few weeks to manage an IPO to see if there is any interest from institutional investors in a dual track process in the hope of increasing the price tag.

It is understood Mr McCarthy wants at least £450m and a handful of Middle Eastern investors are thought to be looking at the business should talks with Galeries Lafayette collapse.

The independent retail analyst Nick Bubb said Galeries Lafayette seemed like a natural fit to buy the company as it had made clear it wants a presence in London.

He added: "The chairman is a skilled negotiator and it is hard to tell if the news Galeries Lafayette is in exclusive talks with House of Fraser is a masterstroke or a desperate last throw of the dice, after all other solutions to the distressed balance sheet and shareholder base have failed."

House of Fraser had struggled previously to keep up with rival John Lewis, with underinvestment particularly in its online business. However, a major revamp of its Oxford Street flagship and its website saw sales up 0.8 per cent in the three months to the end of October, and a 31 per cent boost in internet sales.

Sports Direct and Newcastle United owner Mike Ashley looked at buying a minority stake in House of Fraser last year but is thought to have been put off by the £400m pension deficit, the refinancing required on its current debt and strict pre-emption rights held by the current owners over any possible sale.

Meanwhile, rival department store Debenhams saw its share price sink 3.55p to 78.45p after it was revealed the chief finance officer wrote to suppliers of its own brand products demanding a retrospective 2.5 per cent discount.

All outstanding payments would have the discount added, with Debenhams claiming the discount was right because of the "contribution" the suppliers received from the department store's investment plan and the extra customers it generates.

But some in the City were unconvinced and appeared to suggest the decision was because the company is struggling this Christmas – sales have started – with both HSBC and UBS downgrading the department store. Debenhams are not the first to demand discounts from suppliers. John Lewis and Laura Ashley have both written similar letters.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Guru Careers: Research Associate / Asset Management Research Analyst

£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...

The Green Recruitment Company: Graduate Energy Analyst

£20000 Per Annum: The Green Recruitment Company: Summary: The Green Recruitm...

Day In a Page

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'
Singapore's domestic workers routinely exploited and often abused in the service of rich nationals

Singapore's hidden secret of domestic worker abuse

David Cameron was shown the country's shiniest veneer on his tour. What he didn't see was the army of foreign women who are routinely exploited and often abused in the service of rich nationals
Showdown by Shirley Jackson: A previously unpublished short story from the queen of American Gothic

Showdown, by Shirley Jackson

A previously unpublished short story from the queen of American Gothic
10 best DSLRs

Be sharp! 10 best DSLRs

Up your photography game with a versatile, powerful machine
Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

Solved after 200 years

The mysterious deaths of 3,000 soldiers from Napoleon's army
Every regional power has betrayed the Kurds so Turkish bombing is no surprise

Robert Fisk on the Turkey conflict

Every regional power has betrayed the Kurds so Turkish bombing is no surprise
Investigation into wreck of unidentified submarine found off the coast of Sweden

Sunken sub

Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
Instagram and Facebook have 'totally changed' the way people buy clothes

Age of the selfie

Instagram and Facebook have 'totally changed' the way people buy clothes
Not so square: How BBC's Bloomsbury saga is sexing up the period drama

Not so square

How Virginia Woolf saga is sexing up the BBC period drama
Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

Still carrying the torch

The seven teenagers given our Olympic hopes
The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

The West likes to think that 'civilisation' will defeat Isis...

...but history suggests otherwise
The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

The bald truth

How thinning hair made me a Wayne Rooney sympathiser
Froome wins second Tour de France after triumphant ride into Paris with Team Sky

Tour de France 2015

Froome rides into Paris to win historic second Tour
Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

A new beginning for supersonic flight?

Concorde's successors are in the works 15 years on from the Paris crash