Hunter drops £197m bid for House of Fraser

Tom Hunter, the Scottish retail entrepreneur, backed away from making a formal bid for the department store group House of Fraser yesterday but challenged the management to deliver more value for shareholders.

Mr Hunter, who has a 6.95 per cent stake in House of Fraser, had approached the company with an indicative offer of 85p a share, valuing the company at £197m.

Shares in the group fell 2.5p to 68.5p yesterday as Mr Hunter decided to walk away. Under Takeover Panel rules he will not be able to bid again for six months.

The move delays any plans Mr Hunter may have had to merge House of Fraser with the rival department store group Allders, where he has a 10 per cent stake.

Mr Hunter criticised House of Fraser's management saying they had "consistently refused to enter into substantive discussions".

He added: "We remain a significant shareholder in House of Fraser and look forward to hearing management's proposals to deliver value in excess of our 85p offer."

Analysts said Mr Hunter's decision was inevitable following House of Fraser's refusal to allow him access to its books. "Without due diligence his bankers wouldn't have let him do it," said Richard Ratner, analyst at Seymour Pierce. "It doesn't make any sense without Allders anyway."

John Coleman, House of Fraser's chief executive, said: "The business remains as convinced as ever in our strategy of brand development, targeted investment in our existing store portfolio and new store opening programme."

Mr Coleman yesterday bought a further 100,000 shares at 69p each, taking his total holding to 1.1 million.

Allders is recommending a 160p-a-share offer from Scarlett Retail, a bid vehicle backed by the Minerva property group and Terry Green, the former Bhs chief executive. But Mr Hunter can block the bid with his stake.