Mystery bid for Allders keeps market guessing

Allders, the UK's fourth-largest department store chain, yesterday confirmed it had received an approach, but declined to name the bidder.

Rumours were circulating in the City earlier this week that Allders was entering takeover talks with a possible buyer. Minerva, the property company that owns a 25 per cent stake in Allders, its rival department store chain House of Fraser and the Icelandic retailer Baugur are being named as likely candidates.

All three groups declined to comment on whether or not they had made an approach to Allders. Investors will have to wait for a further announcement as to the identity of the bidder and the Allders board's response to the offer.

News of the approach sent shares in Allders up 20 per cent to close at 144p.

The company said it had received a preliminary approach from a third party, which may or may not lead to a cash offer, and that discussions were at an early stage.

House of Fraser has been linked with Allders in the past, but Baugur has surfaced as a possible bidder after it became known the Icelandic group sought to take up to a 10 per cent stake in Allders at the end of last week. It was unable to buy in at the right price.

Baugur owns a 7.6 per cent stake in House of Fraser, and it is thought it would want to merge the two chains.

"On paper, a merger would appear to make sense, but it has been tried before and didn't happen," Ian McDonald, an analyst at Numis Securities, said. "A bidder will want to wait until after Christmas to see how its trading fared. That will affect the price."

Baugur has shown interest in breaking in to the UK market, having failed in a bid for Arcadia, owner of Topshop, in August. A business such as Allders would be very attractive to the group.

The interests of Minerva and Allders, however, have become more closely aligned after a deal for Allders to be the anchor tenant in Minerva's Croydon retail development.

"Minerva has said in the past it had no intention of buying up more shares in Allders," Alan Patterson, an analyst at HSBC, said. "But it is now much more interested in what happens to the company." Any external bidder would have to convince Minerva the deal was safe, as well as offer an agreeable premium to its market price.