By and  on October 17, 2007

Icelandic firm Baugur Group is the leading contender to make an offer for Saks Inc. — but don't expect one until at least after the holiday season.

Financial sources said early this week that executives at Baugur met with their counterparts at Saks about two weeks ago. On Tuesday, Wall Street analysts were trying to get a read on the feasibility of a deal as well as a price tag for the retailer. Sources agreed Baugur was the most likely candidate to pursue Saks.

Baugur took an 8.1 percent stake in Saks in July, emerging as the company's second-largest investor. The largest shareholder remains Mexican billionaire Carlos Slim Helu who, with other family members and through Immobiliaria Carso SA De CV, owns nearly 13.3 million shares, or a 9.3 percent stake.

The Icelandic firm has made no secret of its desire to enter the U.S. market. Baugur's newly appointed executive chairman and former chief executive officer Jón ásgeir Jóhannesson said in 2006 that his firm wanted to start operations in the U.S. in 2008. The group already has a U.S. presence through Mosaic Fashions, a holding company for Karen Millen stores in Atlanta, Boston and Los Angeles.

As for any interest in Saks, a spokeswoman for Baugur declined comment, but confirmed the company's stake in the high-end luxury retailer. Reports in the U.S. also had a Baugur executive from Iceland relocating Stateside. The spokeswoman disputed that, but acknowledged that Jóhannesson recently bought "a property in New York."

Sources believe Baugur is beginning preliminary courtship talks to convince the Saks brass about the feasibility of a buyout of the luxury retailer. However, it is widely believed among Wall Street sources that any offer is unlikely to come until after the holiday season is over because both sides will want to see how that key sales period plays out.

Citigroup Global Markets retail analyst Deborah Weinswig said in a research note late Monday, "Saks is one of very few public (NYSE) luxury retail companies that remain and because of its strong [New York] presence, it is a brand that has global recognition and can translate well internationally. Also, [Saks] has had some experience abroad through its licensed agreements in Saudi Arabia, the United Arab Emirates and over the next few years in Mexico and China. Based on these factors as well as the weak U.S. dollar, we believe [Saks] could interest both domestic and international private equity investors alike."

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