Arcadia chief seeks clarity over Baugur role in bid

Arcadia, the fashion retailer, said yesterday it would not decide on the merits of Philip Green's £800m cash bid for the company until the retail entrepreneur clarified the position of Baugur, the Icelandic retailer which is Arcadia's biggest shareholder.

Baugur, owns 20 per cent of Arcadia shares and had been hoping to buy Miss Selfridge, Top Shop and Top Man from Mr Green as part of the deal.

But the Icelandic company was hit by a fraud allegation on Thursday which saw its Reykjavic offices raided by police and its chairman accused of accepting forged bills issued by an American company. The company denies the allegations.

In a stock exchange statement yesterday Arcadia said it was "seeking further clarification" regarding the arrangements between Baugur and Mr Green. The UK company needs to know that Baugur can raise the money it needs to buy the chains and whether the fraud allegation will affect its plans.

"We can't consider this offer unless we know (the deal with Baugur) is deliverable," an Arcadia spokesman said. "The ball is firmly in Green's court."

Mr Green could offer to raise all the funds himself and seek a subsequent deal with Baugur. But under Takeover Panel rules a bidder must not enter into special deals with a shareholder unless certain conditions are met.

A note to Rule 16 of the code demands that such related party transactions be approved by independent shareholders. A further requirement is that the target company's advisers must agree that the price of the subsequent related party deal is fair and reasonable.

This means that unless Mr Green decides to seek another buyer for the chains he does not want he must persuade the Arcadia board, its advisers and its independent shareholders that Baugur is in a position to complete the deal.

Analysts said Mr Green would now need to "take a very hard look at the Baugur situation" after the fraud allegations and decide what he wants to do.

Separately it emerged yesterday that Nordica, the company which has accused Baugur's chairman of fraud is not the well-known US ski company but an Icelandic sole trader operating out of Florida. The trader used to supply Baugur but the arrangement was recently terminated.

Baugur issued a statement saying the police action "was stimulated by the complainant's desire to discredit the company" after the end of their commercial relationship.

It reiterated that "the allegations which have been made are of no substance whatsoever and are utterly refuted".

It said no legal actions had been launched against Jon Johannesson, its chairman, Tryggvi Jonsson its chief executive, or against Baugur itself.

Mr Green, who already owns Bhs and the Mark One discount chain, has offered 408p a share in cash for Arcadia. This followed the board's rejection of his previous indicative offer of 365p a share. The shares closed unchanged at 370p yesterday.

But his new offer still has several conditions attached including a recommendation by the Arcadia board, the finalisation of its financing arrangements with HBOS and Baugur agreeing to buy the three chains Mr Green does not want.