No amazing technicolour deal as Joseph goes on sale

Harsh climate for retail reflected as Belgian owner puts fashion chain on the market and prepares for a multi-million-pound loss
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The Independent Online

Joseph, the London-based fashion chain, has been put up for sale by its Belgian owner, who may end up losing money on his five-and-a-half-year involvement with the business.

Albert Frere, a billionaire Belgian banker, has asked merchant bankers BNP Paribas to sell the business. Sales memoranda went out earlier this month and preliminary bids are expected in the next few days.

However, despite a price tag of around £110m, the market for fashion businesses is mercurial at the moment and it is extremely likely that no offer will match the £98m valuation put on the chain when Mr Frere bought a controlling stake in Joseph in 1999.

The fashion chain was founded in the 1960s by the Moroccan-born designer Joseph Ettedgui, who ran it with his younger brother, Franklin. The company came to prominence in the 1980s, when its knitwear and linens became required wearing, and has maintained a strong reputation for its intricate designs.

In the land grab for fashion assets in the 1990s, it was snapped up by Mr Frere's Compagnie Nationale à Portefeuille, which took a 54 per cent stake. The Ettedgui family retained a minority holding but were able to bank £17m, which they used to invest in the leather goods company Connolly.

Mr Frere, the son of a nail merchant who was one of the leading lights in the Banque Bruxelles Lambert group, is one of the best-connected business people in Europe, and sits on the board of Bernard Arnault's fashion, wine and spirits giant, LVMH.

He hired BNP Paribas to conduct a strategic review of Joseph late last year and this resulted in the sales process, which has just started.

Joseph reported an operating profit of £9.4m on sales of £52.8m in 2003, the last set of accounts that is available. It operates from around 50 outlets in the UK - including concessions in Harrods, Harvey Nichols and Selfridges - and has some 300 staff.

The chain is unlikely to prove attractive to the big fashion houses - such as LVMH, Gucci and Burberry - because it is so UK focused. But there may be a fair bit of private equity interest: the likes of Change Capital Partners - the investment business formed by former Marks & Spencer chairman Luc Vandevelde - Advent International, Apax Partners and 3i are all likely to be tempted. Another potential buyer mentioned is Keven Stanford, the backer of the Karen Millen women's fashion shops, which he sold last year for £120m.

However, despite the potentially long queue of potential acquirers, the recent history of selling UK fashion businesses does not indicate that Joseph will command the £110m that BNP Paribas is looking for. "Joseph needs quite a lot of investment if it is going to be a serious international business, and I'm not sure anyone is prepared to put the money in," said a banker with fashion industry connections. "The sale could be another LK Bennett."

Linda Bennett, the award-winning founder of the ubiquitous footwear chain LK Bennett, asked accountants BDO Stoy Hayward to find potential buyers for the business last year. Despite over 30 expressions of interest, the highest bids fell more than £30m below the £75m valuation that Ms Bennett put on the company, and she withdrew it from sale last month.

Others, however, have done better selling fashion companies in recent months.

The owners of fashionista shoe maker Jimmy Choo cashed in by selling a half stake in the business to American investment company Hicks Muse for £101m. The price was five times the amount that had been paid for the business in 2001.

Similarly, Barclays Private Equity made a fivefold profit on its investment in Hobbs, the fashion shoe chain, when the business was sold to 3i in a £111m deal last autumn.