Galeries Lafayette, the French department store, is in talks to buy House of Fraser, its British rival. However, House of Fraser is still going ahead with plans to keep the business going in case the talks do not yield fruit.
The owners of the British stores group have been looking for a seller for over a year to dispose the business. However, they have not been successful in getting a buyer due to the large debts and huge pension deficit. It is understood that Don McCarthy has started some exclusive talks with the French department store.
In the past few weeks, the British department store appointed Rothschild to manage an IPO and see if institutional investors have an interest in a dual track process while hoping to increase the price tag.
Mr. McCarthy is expecting at least £450m from the sale of the store. There are also Middle Eastern investors who would like to acquire the department store should talks with the French department store collapse.
According to Nick Bubb an independent retail analyst indicated that Galeries Lafayette seemed like a suitable fit since the company had indicated that it wanted its presence in London. Nick added that the chairman of House of Fraser was an experienced negotiator and it was very hard to tell if the news that the company was in talks with Galeries Lafayette is true or it’s just a desperate attempt after all solutions to the Balance Sheet problems and shareholder base have not yielded any fruit.
House of Fraser had been having problems keeping up with its rival John Lewis. However, a revamp of its Oxford Street flagship and its website saw the company increase its sales up by 0.8% in the three months to the end of October; Internet sales also increased by 31%.