Baugur is considering launching a joint bid for Saks Fifth Avenue, the American department store owner, in partnership with the Dubai-based retailer Landmark Group.

The Icelandic retail group said it "would like to explore the possibility of making a proposal for the acquisition of Saks". Saks operates 54 shops, including the flagship department store on New York's Fifth Avenue.

Baugur bought an eight per cent stake in the chain earlier this year, bringing its total holdings to 8.5 per cent.

Milestone Resources, an investment group headed by Micky Jagtiani, Landmark's chief executive, holds 1.2 per cent. Baugur said it has held exploratory talks with Milestone over launching a joint bid with Landmark.

Baugur has reportedly been weighing up a $3 billion (£1.4 billion) offer for Saks.

Landmark is one of the Middle East's most successful retailers and operates more than 500 shops selling clothes, home furnishings and accessories, as well a chain of New Look franchises.

Baugur, which owns the British department store, House of Fraser, as well as Woolworths and Hamleys, said it "expects to seek to engage in discussions ... with respect to a possible acquisition."

Baugur is thought to have been tempted across the Atlantic by the weak dollar. The acquisition of Saks would also provide a US platform for Baugur's fashion brands, which include Oasis, Karen Millen and Coast.

Saks soared ten per cent to $21.85 in trading after the close last night.

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