By and  on February 2, 2009

LONDON — Baugur Group, the troubled Icelandic retail investor with minority stakes in fashion players such as Saks Fifth Avenue and Matthew Williamson, is shrinking by the day.

A Baugur spokesman on Sunday confirmed an unsourced report in the Financial Times saying the investment concern plans to shut its Reykjavik offices. “Reykjavik will be closed by this summer. Baugur no longer has any business in Iceland, and an office there is no longer viable,” the spokesman said.

In another development, Baugur has quietly parted ways with PPQ, the London fashion label in which it held a 50 percent stake, WWD has learned. A spokeswoman for PPQ said in January that the label is now “completely independent,” but declined to elaborate. The Baugur spokesman declined comment Sunday.

Baugur’s venture business unit took its stake in PPQ in 2006. Subsequently the fashion brand was showcased in a newly opened, 17,000-square-foot space on London’s Conduit Street, occupied by a PPQ store and offices. That space has since closed.

PPQ is the second investment Baugur has parted with recently. In December, the firm sold the tea and coffee retailer Whittard to Epic, a London-based private equity group, for an undisclosed sum, after the chain was placed into administration, the U.K. equivalent of a Chapter 11 bankruptcy filing.

Baugur’s Shoe Studio footwear chain is still on the selling block, and another name in Baugur’s portfolio, Mosaic Fashions, which owns high street brands like Karen Millen, is looking for an acquirer, according press reports last week.

While stopping short of saying layoffs were imminent at Baugur’s head offices in London, the spokesman said the firm was “reviewing its cost base” here and had begun a period of consultation with employees, which could be followed by layoffs. “Going forward, after a period of acquisitions, the company will now be focusing on managing its assets,” he noted.

Until 2008, Baugur’s London office was busy scouring the market for fresh acquisitions.

Baugur is still in the thick of talks with the Icelandic government and Icelandic banks, which hold 1 billion pounds, or $1.45 billion at current exchange, of Baugur’s debt, regarding the company’s fate.

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