House of Fraser buys Beattie for £69 million

UK department store chain House of Fraser Plc is buying rival James Beattie for an agreed £69.4 million to boost its presence in central England and capture valuable properties.

House of Fraser said it would pay 168 pence a share in cash, a 45 per cent premium to Beattie's closing price on June 17, the day before it announced it was in talks about a takeover.

"It strengthens our Midland coverage," said Chief Executive John Coleman, adding there are no overlapping stores with the exception of Birmingham.

He declined to say what plans House of Fraser had for the Birmingham store which last year lost £1.9 million and stands near a House of Fraser shop.

"We intend to take prompt action on it once the acquisition is completed," Mr Coleman said.

Beattie shares jumped 11.6 per cent to a three-year high of 163.5 pence in early trading, while House of Fraser shares edged up one per cent to 105.25 pence, valuing it at £246.5 million.

Consumer spending in Britain has slowed, hitting high street retailers and in particular the traditional department store.

Department chain Allders collapsed earlier this year and other small firms have been looking to merge.

Mr Coleman also said Beattie owned lucrative property sites. "There is significant property potential," he said.

Analysts agreed.

"It's a very good deal," Richard Ratner at Seymour Pierce said. "We think it adds £5 million to House of Fraser's bottom line and the properties could be worth up to £40 million."

House of Fraser, which specialises in designer brands, has been reshaping its store portfolio, buying up an Edinburgh-based shop but shutting another in London.

Last year it opened its largest store in London's suburbia.

For the financial year 2004/05, House of Fraser reported profit before tax and exceptionals of £28.2 million.