Jane Norman fights Baugur's legacy to the high street

Two years after the Icelandic investor imploded many UK companies are still reeling. James Thompson reports

Sunday 23 October 2011 02:33

In August 2008, the now-defunct Icelandic investment group Baugur teamed up with Malcolm Walker, the founder of the frozen food retailer Iceland, to make an audacious approach to acquire Woolworths.

The failed bid – just weeks before the Icelandic banking system started to implode and three months before the pick 'n' mix retailer collapsed – came to epitomise the hubris of Baugur, which at its zenith controlled nearly one in ten of the multiples on the high street.

But nearly three years later the legacy of the Icelandic debt-fuelled invasion of the UK high street is still being played out, with the future of Jane Norman, the women's fashion chain – in which Baugur once had a near-40 per cent stake – hanging in the balance this weekend.

A consortium of banks hired PwC earlier this month to run a sale of Jane Norman, which has debts of nearly £140m, on sales of about £145m. Another former Baugur-backed group, Aurora Fashions, which owns Coast, Oasis and Warehouse, and another unnamed bidder are interested in rescuing Jane Norman. But if a buyer cannot be found the retailer is likely to fall into administration over the coming weeks.

At the healthier end of the high street, Iceland Foods, the frozen food retailer previously backed by Baugur, is also up for sale. Iceland's founder Malcolm Walker, Asda and Morrisons are all interested in buying the highly profitable chain.

Indeed, seemingly, one-by-one the former inhabitants of Baugur's retail empire are being put up for sale by the resolution committees of the big three failed Icelandic banks – Glitnir, Kaupthing and Landsbanki. With another sale process, Aurum Holdings, the owner of Mappin & Webb, Watches of Switzerland and Goldsmiths, hopes to be sold for as much as £200m.

However, a number of other Baugur-backed retailers have continued to be dogged by their Icelandic banking legacy. Only last month, the trendy fashion retailer All Saints had to be rescued by Lion Capital and Goode Partners in a deal worth £105m. Previously, discount fashion chain Mk One – which fell into administration in May 2008 shortly after Baugur sold it to Hilco, the restructuring specialist – had not been so lucky and eventually vanished.

In its defence, Baugur – which typically took a minority stake of less than 40 per cent in a portfolio company – backed a number of winners. These included House of Fraser, and the cash-and-carry firm Booker, which, along with Iceland Foods, was part of Baugur's £326m acquisition of the Big Food Group in 2004. While Baugur was placed into liquidation in March 2009 with debts of £1bn on its balance sheet, the Icelandic banks will recoup far more than this through the eventual sale of House of Fraser, Hamleys, Aurum and Iceland Foods.

However, Jane Norman, which is thought to be suffering shortages of stock in some shops, does not fit into this category. While the collapse of Baugur created problems for Jane Norman, such as credit insurers reducing cover for its suppliers, it has contributed to its own problems, such as through weak buying and expanding overseas too quickly.

Wendy Massey, a senior analyst at Retail Week Knowledge Bank, also says that Jane Norman moved too far into mainstream fashion and introduced a premium range in 2007-08, which alienated some of its core 16 to 25 year old female customers. "In its heyday, it was a very edgy, clubbing-oriented, high fashion brand and over the years that seems to have got diluted," says Ms Massey.

Jane Norman's operating margin has more than halved from 19.5 per cent in 2007 to 7.3 per cent in the year to March 2010. According to industry sources, Jane Norman's sales are now as low as £425 per square foot, having been as high as £700-plus in 2003.

And only 23 of its 90 UK standalone stores are thought to make a meaningful contribution to profits, although its concessions in Debenhams perform much better. Nick Bubb, an analyst at Arden Partners, said: "A few years ago, Jane Norman seemed to be doing pretty well, but it appears to have run out of steam in a crowded market."

Debenhams is likely to have a major say in the future of Jane Norman, as it has a change of ownership clause with the young womenswear chain. This means it could terminate Jane Norman's concession agreement if it is bought by a third party.

While Jane Norman may yet find a buyer, it will not be an Icelandic investor eager to splash the cash. When the history books are written on Baugur, it is unlikely to make happy reading for Jon Asgeir Johannesson, its former chairman.

Baugur's Former Empire


Considering a sale but advisers have not yet been appointed. The toy retailer delivered profits of £100,000 in the year to 29 March 2010 – its first in six years.

Garden Centre Group (formerly Wyevale)

Forced into debt-for-equity swap with HBOS in February 2009. Renamed as Garden Centre Group in 2009.

All Saints

Rescued by Lion Capital and Goode Partners, the US private equity firms, in a deal worth £105m in May. All Saints had faced a liquidity squeeze after rapid expansion.

Julian Graves

Sold to Holland & Barrett for less than £20m in September 2008.

Iceland Foods

Up for sale, with founder Malcolm Walker, Asda and Morrisons eyeing a £1.6bn bid for the frozen food chain. It posted profits of £155.5m last year.


Chain was demerged from Mosaic after Baugur sold a stake in Whistles to Jane Shepherdson, who became the retailer's chief executive.

Aurora Fashions (group behind Coast, Oasis and Warehouse)

Emerged the other side of the pre-pack administration of Mosaic Fashions in March 2009. Aurora spun off Karen Millen from the group earlier this year, which may lead to a sale.

Aurum Holdings (firm behind Mappin & Webb, Watches of Switzerland and Goldsmiths)

Has appointed Cavendish Corporate Finance to seek a sale for up to £200m. Aurum posted underlying profits of £16.1m for the year to 30 January.

Principles (formerly part of Mosaic Fashions)

Was part of the administration in Mosaic 2009, which led to Principles' high street shops closing. Debenhams bought the brand and continues to operate it as a concession in its shops.

Whittard of Chelsea

Sold to private equity firm Epic after collapsing into administration in December 2008.

Shoe Studio (formerly part of Mosaic Fashions)

Dune rescued Shoe Studio's six brands, including Pied a Terre and Bertie, from collapse of Mosaic in March 2009. Kurt Geiger later bought Nine West licence.

House of Fraser

Department store completed a £250m bond issue this year and grew profits by 9 per cent to £69.7m in 2010.

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