Tuesday 15 September 2009

Oasis (Update1), Debenhams Said to Consider Buying Karen Millen


Debenhams Plc is considering buying Karen Millen and Oasis, U.K. fashion brands that were forced into administration when Iceland’s banking system collapsed, a person familiar with the matter said.
Debenhams, the U.K.’s second largest department store chain, is concerned in the Aurora Fashions Ltd. brands, which also include Coast and Warehouse, said the person, who declined to be identified because the talks are private. Aurora, held by Kaupthing Bank Hf and former managers, bought the brands from administrators in March.
“You could get Aurora for not a lot of money, say 100 million pounds ($164 million),” said Nick Bubb, an analyst at Pali International in London who has a “neutral” rating on Debenhams. “They have some nice brands. It would be a useful thing to do.”
A spokesman at Aurora, who declined to be identified, said Kaupthing sees the business as a long term investment and it has no intention of disposing of any assets. The brands are performing ahead of plan, he added.
Officials at Debenhams declined to comment. Debenhams, which makes more money from designer brands that it owns than it does from selling clothes on behalf of third parties, is considering “opportunistic acquisitions,” Chief Executive Officer Rob Templeman said in June.
The owner of the clothing lines before Aurora, Mosaic Fashions Hf, entered bankruptcy protection in March following newspaper reports that it owed creditor Kaupthing 450 million pounds in the wake of Iceland’s financial crisis.
Aurora brands, aside from Karen Millen, are already stocked at Debenhams in retail concessions. In March, Debenhams bought clothing inventory from the failed Principles chain, once also owned by Mosaic.
Baugur Stake
“Switching Debenhams concessions to own bought would be logical and would internalize quite a lot of margin,” UBS AG analyst Andy Hughes said by phone. “It would take Debenhams into new territory, as they would have some standalone stores.”
Failed retail investment firm Baugur Hf, which collapsed in February after talks broke down with its main creditors, had a nonage stake in Mosaic.
Debenhams is interested in buying other brands that have currently been taken private, the person familiar with the retailer’s plans said. The person said brands would be like to, but not include, surfwear maker Fat Face Ltd., the U.K. sports clothing chain acquired by Bridgepoint Capital Ltd. Adding stores from competitors such as department-store chain House of Fraser Plc is also an option, the person said.
House of Fraser Chairman Don McCarthy said last week he would “never rule out” selling underperforming stores at the right price.
Debenhams, which has 144 stores, said today that annual profit rose after it gave more space to its more profitable designer ranges. So-called concession ranges, which include Oasis, Coast and Warehouse, under-performed its “Designers at Debenhams” brands, Templeman said on a conference call today.
The shares, which have more than tripled in value this year, fell 4.1 percent to 81.55 pence in London trading. The company has a market value of 1 billion pounds, less than a fifth that of its larger rival, Marks & Spencer Group Plc.
Templeman, besides considering purchases, has been repaying debt after raising 323 million pounds selling shares. The CEO said he would update the market on acquisition plans at the Oct. 22 earnings announcement.

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