Baugur, the Icelandic retail investment group, is close to securing a refinancing of its Julian Graves health food chain in a deal that could see it recoup much of the £21.5m it spent buying Whittard of Chelsea, the specialist tea retailer. The refinancing comes after Baugur secured a recommendation for its £350m takeover offer for House of Fraser, the department store chain.

Although talks with lenders on the new finance package have yet to reach a conclusion, a deal is expected soon. Gunnar Sigurdsson, the managing director of Baugur's UK business, said: "The Whittard of Chelsea deal was structured through Julian Graves, a company we bought in 2003. It was Julian Graves that bought it.

"There will be a refinancing of Julian Graves, but it's not clear that there will be a lot of cash to come out of that for shareholders. It remains to be seen." Baugur refinanced Iceland , the frozen food retailer, this year. That deal allowed the company to recoup the acquisition finance it put up to fund the £160m deal. The Icelandic group's takeover of House of Fraser will be part-financed by a sale and leaseback deal on the House of Fraser headquarters, close to Victoria station in London . The deal is estimated to be worth between £30m and £35m.

Some House of Fraser shareholders have warned that they will reject the deal. The rebellion is being led by Robin Geffen, the chief investment officer of Neptune Investment Management, which holds almost 4 per cent of the company's shares. Geffen said: "This is not a fair valuation at all. This is a bid from a rich boys' club that has been formed to get hold of assets that are owned by the small shareholders at half price.

"House of Fraser will make £31m in profits this year. That values the bid at just over 10 times earnings. It's an insult." He added: "They're getting together to drain all the cash out of an overcapitalised business. It's just like CVC did with Debenhams - Baugur will vomit this back to the stock exchange in three years' time with all the goodies having been ripped out." According to Neptune 's analysis, the Baugur consortium could potentially extract 80p a share through sale and leaseback deals, and a further 125p a share by using the company's dividends to refinance the business. Geffen claims that the consortium could be in a position to withdraw 205p a share in cash from the business within just three months. "We're going to fight to the death on this one," he said.