Iceland’s FL Group acquires stake in £351m House of Fraser buyout

FL Group, an Iceland investment group, has purchased a 14% stake in UK department store chain House of Fraser, bought by a consortium led by Iceland’s Baugur Group for £351m.

FL Group, an Icelandic investment company, has acquired a stake in House of Fraser, a UK retailer of designer brands, in a £351.4 million (€520 million) purchase led by retail-focused Baugur Group.
The board of House of Fraser has accepted a 148 pence per share bid from the Highland Consortium, which consists of Baugur Group, an Iceland investment group, FL Group, West Coast Capital, a UK retail-focused private equity firm, Bank of Scotland and retail entrepreneurs Don McCarthy, Kevin Stanford and Stefan Cassar. FL Group will a 13.9 percent stake in the business.
The bid gives House of Fraser an enterprise value of approximately £453.4 million.
“This is the first private equity transaction that FL Group has announced in the UK since we established our London office and follows on from the successful investment in Unity from which we made a significant profit from our position in Marks & Spencer, which we realized in May,” said Hannes Smarason, chief executive of FL Group. “Our strategic focus continues to be to establish a significant private equity brand within the European market and build influential investments in both listed securities and private business.”
FL Group opened a London office in May, headed by managing director Adam Sham, previously UK head of M&A for Kaupthing Bank. The UK office led the acquisition of 3i’s stake in Netherlands-based fruit juice company Refresco in a €461 million deal, and the €325 million sale of a 16.9 percent stake in budget airline easyJet.
FL Group also sold a stake in UK retail chain Marks & Spencer earlier this year through its holding company Unity, a partnership with Baugur Group and Kevin Stanford, which holds stakes in UK retail outfits French Connection, Moss Bros and Woolworths.
House of Fraser operates 61 department stores in the UK and Ireland under the House of Fraser, Frasers, Howells, Dickins & Jones, Rackhams, Army & Navy, Jenners and Beatties brands. The stores sell clothing, fashion accessories, beauty and home products including its own-label brands Linea and Therapy.
For the year ended 28 January 2006, House of Fraser reported sales of £1.01 billion, up from £910.2 million in 2005, and profit before tax of £27.3 million.