Icelandic group makes indicative bid of #350m for House of Fraser

Baugur, the Icelandic group, looks set to continue its high-street buying spree after making an indicative cash bid of £350 million (€509.5 million) for House of Fraser.

The board of the department store yesterday confirmed it was in talks with the Icelandic group about a takeover approach worth 148p per share. The board said in a statement that "following receipt of an approach from Baugur, discussions are continuing between the parties relating to a potential cash offer".

The Icelandic group is conducting due diligence with the co-operation of House of Fraser's management, who are likely to stay on if the proposed takeover is successful.

A formal offer is due in August and is expected to come in very close to the indicative price, which has been agreed informally. The approach follows a sustained wave of private equity interest in UK retailers, which have been struggling recently in the face of weak consumer spending.

The Icelandic group has already snapped up a string of brands from women's fashion to children's toys, buying Whistles, Oasis, Coast and Karen Millen to create the Mosaic clothing group, while also acquiring Hamleys, the toy store, and Whittard of Chelsea, the speciality tea shop.

These brands are likely to be introduced across House of Fraser's nationwide chain of 60 stores if the takeover is completed by Baugur, which already owns two leading department stores in Denmark, including Illum, which has been converted almost entirely to concessions since being taken over.

Concessions are increasingly replacing the traditional department store model of selling own-label goods as private buyers seek a flexible business model.

This model has been successfully introduced by rival department stores such as Selfridges and Debenhams, which was recently brought back to the public market by a private equity consortium.

Baugur confirmed in May that it was in talks with House of Fraser after raiding the market for a 9.5 per cent stake. Shares in House of Fraser rose by 3.5 per cent to close yesterday at 133¼p.