House of Fraser shares tumble as Hunter and Baugur bail out
Tuesday 14 September 2004
The prospect of Tom Hunter, Scotland's richest man, bidding for House of Fraser vanished yesterday when he sold his 11 per cent stake in the department store group. More than one-fifth of the retailer found a new home, with Iceland's Baugur also selling its 10 per cent shareholding.
Shares in House of Fraser dipped 8 per cent on the news, which ends almost two years of speculation that Mr Hunter would launch a takeover bid for the owner of Dickens & Jones and Army & Navy. The entrepreneur started building his stake in December 2002, when he made an 85p-a-share approach to buy the group.
Dealers said the stake, sold by House of Fraser's joint broker Dresdner Kleinwort Wasserstein, was placed with a variety of institutional investors at 113p a share, raising £55.6m in total.
A spokesman for Tom Hunter, who just two weeks ago denied reports that Mr Hunter was planning to sell his shares, said: "We didn't really need to cash this in to fund any more deals. We were offered a good price and made a calculated business decision to sell."
The move crystallises more than £9m profit for Mr Hunter, whose private equity group, TBH Investments, owns a number of high-street retailers, including Office, the shoe shop chain, and Birthdays, the greetings card group. City attention will now focus on Mr Hunter's near 8 per cent stake in JJB Sports, which issued a profits warning last month.
Several institutions who are new to House of Fraser are understood to have bought the majority of the 49 million-plus shares that were sold. A number of existing long-term investors also added to their holdings, banking sources said.
House of Fraser's shares fell 9.25p to 117.75p, down from a five-year high of almost 130p. The stock has more than doubled in the past 12 months. Analysts said the prospect of a profits boost from GE Capital, the company that runs its loyalty and stores cards business, had helped to support the stock. The most bullish analysts are predicting that a new agreement with GE Capital could amount to 90p a share to the department store group's value.
Mr Hunter's decision to sell his holding puts paid to his dreams of consolidating the UK's department store sector. Last year he withdrew from a bidding battle for Allders, which was snapped up by the property group Minerva. Allders has recently been put back in play by Minerva's decision to put itself up for sale - but few analysts believe Terry Green, who runs Allders, could raise the funding to combine his group with House of Fraser.
A spokesman for Baugur said it decided to sell because "it didn't look as if a takeover bid would come" for House of Fraser.
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