Shareholders in Debenhams have experienced something unusual of late — the sensation associated with their investment rising in value rather than falling.
Now we know why. On Tuesday, Unity Investments, an investment vehicle owned by Icelandic raiders Baugur and serial entrepreneur Kevin Stanford, disclosed that together they now control 4.87 per cent of Debenhams.
The holding has been built over the past week, through JP Morgan, using a total return swap, giving rights over 41.8m shares up until the end of February next year. While the position was being accumulated, shares in Debs have risen from 129p to 141p; during early trade on Tuesday the price jumped through 145p.
That compares with the 195p at which the department stores chain floated last May.
There was no immediate indication as to whether the Baugur team might have approached Debs ‘ management, led by Rob Templeman, or indeed whether they might have gone direct to its private equity bankers, TPG, CVC and Merrill Lynch Private Equity, who still control over 30 per cent of the business.
What is clear, though, is that Debenhams is now very clearly in play.
Could, and would, Baugur, launch a bid of its own? Such a takeover would be substantially larger than anything attempted by the Icelanders before, but the sheer pace of dealmaking set by Baugur’s chief executive, Jon Asgeir Johannesson, has now created a group with reputed turnover of £10bn through 3,800 stores in about 35 countries.
Baugur’s retail boss, Gunnar Sigurdsson, was quoted on the matter recently in the flagship trade title, Drapers Record:
“Since arriving in the UK in 2003, the Icelandic powerhouse has swept the high street, buying staple members of the UK retail line-up, including House of Fraser and Mosaic brands Oasis, Coast and Karen Millen. It has also built up stakes in French Connection and Moss Bros.
“Market speculation also suggests Baugur could bid for department store group Debenhams, and when pushed Sigurdsson does not rule it out. “Debenhams carries a lot of our brands – Mosaic and Jane Norman are in there in a very big way. It could make sense but that is future music,” he says.”
Not every investment made by Baugur in British retailing has proved to be shrewd: the Icelander’s 10 per cent holding in Woolworths, for example, has proved disastrous.