£72m deal ends Liberty's freedom after 125 years

Property group to overhaul loss-making company's flagship London store and concentrate on building e-commerce ventures

Liberty, the upmarket fabrics retailer with a flagship store on Regent Street, is set for a radical overhaul after accepting a £72m takeover by a property group.

Liberty, the upmarket fabrics retailer with a flagship store on Regent Street, is set for a radical overhaul after accepting a £72m takeover by a property group.

The sale ends 125 years of independence for Liberty, whose mock-Tudor department store on Great Marlborough Street, which is linked to the Regent Street shop, is a London landmark. It also ends years of in-fighting, which culminated in a boardroom clear-out three years ago caused by a dispute between the founding family and the board of directors.

Under the deal, the Regent Street building will be leased to other retailers, and its upper floors converted to serviced offices. The Liberty store will be reduced to the adjoining mock-Tudor building on Great Marlborough Street.

The new owner, Marylebone Balfour Warwick (MBW), which bought the Howard Hotel from the Barclay Brothers last month, says Liberty will stop selling menswear. Instead, more emphasis will be put on developing Liberty outlets in other UK department stores and building an e-commerce business. MBW will seek to repeat the formula in shopping cities such as Tokyo, New York and Milan

"Liberty has been trying to compete with stores such as Harrods and Harvey Nichols but it is not really a department store. It is a brand like Gucci," said Richard Balfour-Lynn, chief executive of MBW.

He confirmed that there would be job losses among the 500 Liberty staff but said many would be moved to areas such as mail order and e-commerce. Liberty's board of directors will leave, although the company is expected to retain the operational management.

Philip Bowman, Liberty's chairman, said: "The Liberty business has been beset by uncertainty and underinvestment over recent years and, notwithstanding the strength of its brand names, has found trading conditions very difficult." He added that without a substantial cash injection or a takeover, Liberty would have been forced to reduce its selling space or to sell some of its property assets.

MBW is offering 300p a share for Liberty. The deal nets £15m for the founding Stewart-Liberty family, which controls 20.7 per cent of the company. Elizabeth Stewart-Liberty, the family's matriarch, was unable to comment yesterday. Contacted at her home near High Wycombe, she said: "I'm sorry, I've got slug bait in my eye so I can't talk to you."

Liberty's difficulties in a fiercely competitive retail market were underlined yesterday by full-year results, which showed losses widening. The company reported losses before tax of £2.9m in the year to January 29, up from losses of £1.6m last year.

Liberty has been seen as a struggling retail store for a long time, with its well-located store held back by the complications of its old-fashioned layout, containing numerous cramped corridors and walkways. Although it plans to introduce new lifts and airconditioning this September, the store has already been left behind by swisher rivals in the area, including the department stores Selfridges and Dickens & Jones, which have spent huge sums on refurbishments.

A £43m proposal to update the flagship Liberty store caused the family to fall out with its board three years go. The family felt the plan was too expensive. The bust-up led to the ousting of Denis Cassidy as chairman at a shareholders' meeting in which the Stewart-Liberty family teamed up with the rebel shareholder Bryan Myerson.

Mr Myerson, a South African, is not selling his 17 stake in Liberty. He will retain shares in the new company, which will seek a separate listing on the Alternative Investment Market in the summer.