Battle for control of Arnotts set to intensify

The battle to take full control of Arnotts department store in Dublin is set to intensify in coming weeks, as its two rival shareholder blocs step up negotiations that are likely to result in one side buying out the other.

It has emerged that BlueGem Capital, a UK private equity company, has teamed up with Apollo Capital, a US group that owns 50 per cent of Arnotts.

BlueGem, which owns the upscale Liberty department store in London, intends to invest in the Dublin retailing institution, according to a report in yesterday's Sunday Times.

It is understood Apollo and its partners are due to hold further talks in coming weeks with Fitzwilliam Finance Partners, the vehicle controlled by the developer Noel Smyth that owns the other half of Arnotts.

Each shareholder bloc wants to buy out the other, with Apollo thought to be particularly determined to win out.

The Irish Times revealed this month that Fitzwilliam, which was previously backed by Brown Thomas owner Galen Weston, has turned instead to London & Regional (L&R), which is owned by the billionaire Livingstone brothers, who until recently owned the InterContinental hotel in Dublin.

It is understood senior L&R executives are due in Dublin in coming days, although it is unclear if a bid for Arnotts will be discussed.

In addition to the ongoing buyout negotiations, Apollo and Fitzwilliam have also held talks about ongoing funding of Arnotts, which has emerged from the downturn with growing sales as confidence returns to Irish consumers.

Apollo and Fitzwilliam have told the board of Arnotts that if the store requires further working capital over the coming year, both sides will commit to talks “with management and the other party with [a] view to providing sufficient financial support”.

Arnotts is trading well, with recently filed accounts for the year to the end of January 2014 showing it made an operating profit of €12.5 million on increased revenue of about €120 million, a doubling of its trading profitability.

Fitzwilliam took control of its half of Arnotts after it bought €140 million of its loans from Ulster Bank with Mr Weston’s backing, in a deal passed by the then Competition Authority due to the Canadian billionaire’s other Dublin retail interests.

Apollo stole in ahead of Fitzwilliam to take control of the other half to buy €230 million of its loans from IBRC, the former Anglo Irish Bank.

Management anxious for deal

The store’s board and management team are thought to be anxious for the a deal between its two main shareholder blocs, which would allow it invest for the future.

Ray Hernan, the chief executive of Arnotts, recently said it would be better if the situation was finalised.

In the boom years, Arnotts acquired several landholdings and buildings in the vicinity of its Henry Street store for a proposed major retail development called Northern Quarter, which could still go ahead.