The Icelandic group Baugur, which holds an 8.58 percent stake in Saks Fifth Avenue, has cast off its noncore assets, and plans to devote itself to one business: retail.
Baugur said Tuesday it has agreed to sell off its media, technology and financial investments to two new independent companies — Stodir Invest and Styrkur Invest — for 430 million pounds, or $847 million at current exchange.
The money from the sale will be funneled into Baugur's war chest, and earmarked for future retail investments worldwide, company principals said.
"The changes...will allow us to take advantage of investment opportunities which will arise in the current market conditions," said Gunnar Sigurdsson, chief executive officer of Baugur Group. "We will also continue to build on the existing strengths of our brand portfolio."
Sigurdsson said the brand portfolio was valued in excess of 1.5 billion pounds, or $2.9 billion, and had "significant global potential."
Jón Asgeir Jóhannesson, executive chairman of the company, said these days are both challenging and exciting. "We are in a great position to be at the forefront of developments on the worldwide retail scene," he said.
Baugur, however, did not specify which investments it would be targeting.
A Baugur spokesman in London said the strategy to divest noncore assets was put in motion a year ago, and the overall aim was to "build Baugur globally, and raise investment for opportunities."
Saks Fifth Avenue isn't the only retailer in Baugur's sights. Industry sources in London speculated the Icelandic company would strike on the U.K. high street, which has been suffering from a downturn in footfall and sales, before embarking on any U.S. venture.
Baugur already owns a large chunk of the high street pie, with stakes and substantial interest in companies including Karen Millen, Oasis, All Saints, House of Fraser, Goldsmiths, Hamleys and Debenhams.
It currently has a tentative offer of about 40 million pounds, or $80 million, for the British men's wear high street retailer Moss Bros. Baugur, which has a 29.22 percent stake in Moss Bros, has until the end of April to table a formal bid — or walk away.In addition, the company has a 20.94 percent stake in the struggling fashion retailer French Connection, and regularly quashes rumors about making a bid for that company.
As a result of the latest sale, more than 85 percent of Baugur's portfolio will be concentrated in the U.K., the U.S. and Scandinavia.
The consolidation of Baugur's business could not have come at a better time for the company, which remains exposed to the troubled Icelandic market.
Although the company finances its deals in a variety of ways — via British and Icelandic banks, long-term business partnerships and deals with the in-house management teams at its various companies — 13.9 percent of Baugur's retail assets remain in Iceland.
In addition, Baugur is a private company and it is unclear how much it relies on Icelandic banks, and specifically Kaupthing Bank, based in Reykjavik. The Icelandic krona has lost 22 percent of its value against the euro since January, and last week, Iceland's central bank raised interest rates to 15 percent.
Late last month, Iceland's prime minister, Geir Haarde, traveled to New York in a bid to reassure investors that Iceland's economic woes were exaggerated and that the country's banks were in good shape.
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