House of Fraser takeover draws closer

House of Fraser, the owner of Edinburgh department store Jenners, is expected to be in Icelandic hands by mid-August. HoF , which bought Jenners just over a year ago, is understood to have informally approved a £350m takeover approach from Icelandic investors Baugur. Baugur will complete due diligence and return with a final decision within the next few weeks.

On Friday, HoF said that "discussions are continuing relating to a potential cash offer of 148p a share". But analysts cautioned against such a high offer for the firm. Richard Ratner, head of equity research at Seymour Pierce, said: "We have been expecting an offer to emerge at this level since Baugur bought a 9.5% stake in a dawn raid in April. "Baugur is serious, without a doubt. But there is a lengthy due diligence process and in the meantime plenty of water can flow under the bridge.

"Having said that, we think a deal will go ahead about mid-August." Baugur is believed to have already made contact with Bank of Scotland about co-financing the deal with an Icelandic bank. It is not yet sure whether Scottish entrepreneur Sir Tom Hunter will come in and partner Baugur. Baugur and Hunter have teamed up on a variety of deals, including Hunter's £445m takeover of Wyevale Garden Centres.

Last night a spokesman for West Coast Capital, Hunter's investment vehicle, said the two had not made contact with regards to the HoF bid but there was an informal arrangement to discuss any deals. He said: "If Baugur do proceed, we have an arrangement where we can speak to them with regards to coming in." In December 2002, Hunter tabled an unsuccessful 85p-a-share offer for HoF with Baugur's support. The Icelandic group is known for its acquisitive nature. It has already snapped up a string of brands from women's fashion to children's toys.