LONDON — With the dollar gaining value against the pound and euro, a recession looming in the U.K., and a trans-Atlantic credit crunch in full force, it appears Baugur Group may be having second thoughts about a bid for Saks Fifth Avenue.
This story first appeared in the September 8, 2008 issue of WWD. Subscribe Today.
Less than a month ago, Baugur chairman Jón Asgeir Jóhannesson said he was “actively” interested in bidding for Saks. Since he spoke on Aug. 22, however, the dollar has gained in strength, advancing to $1.76 from $1.85 against the pound — making Saks a pricier proposition.
Moreover, the most recent news from U.S. retailers isn’t good. Most of them — including Neiman Marcus, Nordstrom and Saks — reported declines in comparable-store sales in August, raising further fears about the holiday season.
On Friday, the New York Post, quoting anonymous sources, reported Baugur is unlikely to pursue a bid for Saks this year due to tight credit markets and a gloomy economic outlook.
While a Baugur spokesman in London declined to comment on the report, industry sources familiar with the company said nothing had changed at Baugur since its November filing with the Securities and Exchange Commission.
At the time, the company confirmed it was eyeing a takeover of Saks Fifth Avenue, possibly in conjunction with the Landmark Group. “Nothing has changed since then, and an interest in Saks remains,” one source said.
Meanwhile, Freddie George, a research analyst with Seymour Pierce in London, said he wouldn’t be surprised if Baugur was getting cold feet.
“So many of Baugur’s shareholdings in the U.K. — like French Connection, Moss Bros, Woolworths and Debenhams — have fallen substantially in value. Other shareholdings are doing well, but overall, the Baugur balance sheet is quite stretched right now,” he said.