Deutsche stands firm after Harvey Nicks talks

The £137.5m buyout of Harvey Nichols, the upmarket department store group, was in jeopardy yesterday after a major shareholder said it was unhappy with the terms following a crunch meeting with the company.

Deutsche Asset Management owns 14 per cent of the shares and can block the deal. This is because the buyout by Dickson Poon, the Hong Kong businessman who controls 50.1 per cent of the equity, requires a 75 per cent majority of the remaining shares.

The two sides met on Tuesday and a spokesman for Deutsche Asset Management said: "It was a useful meeting but we still feel that the bid undervalues the company." However, the fund management group declined to say whether it would reject the bid by the mid-November deadline. "There is quite a long lead time," it said. "A number of options remain open."

Harvey Nichols commented: "The deal remains unchanged at the moment and we have no further comment."

Mr Poon has made a cash offer of 250p a share for the remainder of the equity. This represents a 35.5 per cent premium to its previous closing price but is below the 270p a share issue price when the company floated in April 1996.

At the time the offer was made Mr Poon said it represented "good and certain value" in turbulent equity markets. But Deutsche Asset Management believes the company is worth 300p-plus a share.

The shares closed unchanged at 247.5p yesterday.

Harvey Nichols is best known for its flagship store in London's Knightsbridge. It has expanded significantly in recent years, opening outlets in Leeds, Birmingham and most recently in Edinburgh. A new store is scheduled to open in Manchester next September. Harvey Nichols also expanded into restaurants with the Oxo Tower and Prism in London.

In June the company reported a 20 per cent fall in profits to £12.5m, though it said sales were starting to recover from the post-11 September slump.