Billionaire Livingstone brothers enter race for Arnotts

London & Regional, a property company owned by the UK billionaire Livingstone brothers, has replaced Brown Thomas owner Galen Weston as backers of a bid by developer Noel Smyth to take control of Arnotts.

It is understood that L&R, which owns the Intercontinental hotel, formerly the Four Seasons, in Dublin’s Ballsbridge, was recently brought on board by Mr Smyth to fund his bid.

Mr Smyth's Fitzwilliam Finance Partners took control of 50 per cent of Arnotts in 2013 after it bought €140 million of the department store's Ulster Bank loans. It struck that deal with financial backing from Wittington, Mr Weston's main company which also owns Brown Thomas.

The other 50 per cent is controlled by New York-based listed property fund Apollo Investment, which pipped Fitzwilliam to buy €230 million of Arnotts loans from IBRC, the former Anglo Irish Bank.

Unwilling

It is understood that Wittington walked away from a potential Arnotts deal a number of weeks ago, after it became clear Apollo was at that stage unwilling to sell its 50 per cent stake to Fitzwilliam. Mr Smyth then turned to the Livingstone brothers, with whom he has discussed deals in the past.

Wittington’s involvement in Arnotts was previously cleared by the Competition Authority,which investigated whether it would give Mr Weston’s companies undue influence over the retail market. Mr Smyth’s consortium is locked in talks with Apollo over the future of Arnotts.

Both shareholder blocs want to buy out the other to gain full control of Arnotts, which could form the centrepiece of a future major property redevelopment in the north city centre.

Boom

In the boom years, Arnotts previous owners, led by barrister

Richard Nesbitt

, planned such a scheme, known as Northern Quarter, and bought a number of adjoining buildings and sites to facilitate it.

It is believed that Apollo and Fitzwilliam have differing views on how Arnotts should be run into the future, and both sides accept it is unlikely they can work together on a long-term basis.

It is understood that Apollo admires the upscale Liberty department store off Regent Street in London, and envisages moving Arnotts upmarket. Mr Smyth’s consortium, however, favours retaining Arnotts character as an upper mid range department store.

In recently filed accounts for the year to the end of January 2014, Arnotts made a trading profit of €2.5 million on increased revenues of about €120 million. The store has reported increased trading levels as consumer confidence rises.

Arnotts declined to comment on Thursday, as did Mr Smyth and Apollo.