Stalker gives up hunt for Arcadia

BAUGUR, the Icelandic firm that has spent months stalking retailer Arcadia, is throwing in the towel. Chief executive Jon Johannesson has decided it is not worth trying to resurrect a deal, now that Arcadia shares are above 300p. He has told bankers the bid is off and he wants to focus on running his own business in Scandinavia.

Arcadia chief executive Stuart Rose, who would have made £16m if the deal had gone ahead, called off talks with Baugur last month, after becoming fed up with delays. Johannesson was reluctant to give up and continued to talk to his backers about an improved deal. Now he has had enough, but plans to hold on to the group's 20.1% stake in Arcadia for the moment.

When Baugur first approached Arcadia in October, it planned to bid 280p to 300p a share, valuing the group up to £568m. But Rose has made great strides since then and analysts reckon a bid would have to top 350p. The clothes retailer closed up 12p at 307p on Friday.

Arcadia owns Top Shop, Dorothy Perkins, Miss Selfridge and Evans, whose Marilyn Monroe-style face is Kirstin Briscoe. Arcadia is growing sales strongly.

Rose, who promised profit before tax and one-off items will be at least £52m for the first half to February, is likely to beat his own forecasts. Debt has also fallen sharply, yet the shares sell at less than nine times prospective earnings. John Baillie at SG has a 'strong buy' recommendation, with a price target of 403p. 'The shares are undervalued, despite the outperformance in 2001,' he said.

Baugur will continue to run franchise stores for Arcadia brands in Scandinavia.

Retailing analyst, Verdict says Arcadia has been one of the main victims of the squeeze on menswear specialists. Its menswear market share dropped by 0.6% in 2001 to 6.2% just a shade ahead of Next. Market leader is Marks & Spencer.