US investor Herro raises stake in Signet

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David Herro, the veteran fund manager and activist shareholder who ousted Maurice Saatchi from his advertising firm in the Nineties, has increased his stake in Signet Group, the jeweller which is being circled by a private equity bidder.

Mr Herro's hedge fund, Harris Associates, has bought 17 million shares in the past few days, culminating in purchases on Wednesday, the day before news of a bid was confirmed. Heavy trading in Signet shares on Wednesday is likely to have attracted the interest of the London Stock Exchange. On Thursday morning, following a newspaper report, Kohlberg Kravis Roberts and Apax Partners confirmed that they were considering a joint bid. Signet shares shot up 15 per cent on Thursday, and they fell back yesterday by just 0.25p to close at 116.5p.

Chicago-based Harris Associates, where Mr Herro is a long-standing fund manager, told Signet yesterday that it had increased its stake by 1.0 per cent to 12.7 per cent, through a series of purchases culminating on 2 August. The bid interest in Signet - which KKR and Apax stressed was at a preliminary stage - makes Mr Herro a pivotal figure in two takeover battles in the UK retail sector. Harris is also the largest shareholder in Matalan, where John Hargreaves, founder and chairman, is bidding to take the group private.

Mr Herro has been a long-term shareholder of Signet and has been building up the stake steadily. It has doubled in the past two years. It is understood that the company is unconcerned by the latest share purchases, as it views Mr Herro as a supporter. Signet is expanding fast in the US market, where it owns the Kay and Jared chains of jewellers. The company believes that the American market is ripe for consolidation. It is market leader but has just 8 per cent of the specialist jewellery market.

Signet executives, led by Terry Burman, have yet to meet KKR and Apax, and contacts between the two sides have been through their respective advisers, Lazard for Signet and Goldman Sachs for the private equity pair.

Sources in the private equity camp were blowing a cool breeze on speculation that a formal bid was a shoo-in, emphasising that the deal would be difficult to do and, because existing management has run the company efficiently, it may not be possible to use cost savings to fund a big premium to the current share price.

Gerald Ratner, Signet's former boss, has appointed his own advisers to bid for H Samuel, one of the company's UK retail chains, if Signet is acquired by private equity. But sources in the KKR camp said he had made no approach to them and they were unlikely to sell while consumer spending in the UK is weak.