HOUSE OF FRASER admitted last night that it had received a preliminary bid approach, which could value the company at more than £300 million.

The department store group admitted receiving the approach after the stock market had closed. At last night’s closing price the company was valued at about £279 million. While the shares rose just 3¾p to 118p yesterday, they have shot up from 105p over the past week. It is understood that the Takeover Panel forced the company to make a statement to the stock market.

It is also understood that discussions have taken place between the potential bidder and the company, but on a very preliminary basis.

House of Fraser said in its statement: “There can be no certainty that an offer will be made nor as to the terms on which any offer might be made.”

City sources said that Apax, the private equity firm which owns New Look in partnership with Permira, had been considering a potential bid for House of Fraser for several months.

Industry sources also suggested that House of Fraser’s managment team could be considering heading a private equity bid.

Debenhams, the rival department store group, Baugur, the Icelandic retail investor, and Tom Hunter, the Scottish retail entrepreneur, have all looked at possible bids for House of Fraser, but none of those parties are believed to be involved in the current approach.

Mr Hunter spent more than a year stalking House of Fraser in a move supported by Baugur.

However, both those parties sold their shares in September 2004 in a placing by Dresdner Kleinwort Wasserstein, House of Fraser's broker, to about 50 institutional investors.

Minerva, the property company also expressed an interest in bidding for the stores group in 2003, but that bid was linked to its ownership of Allders, the department store chain, which collapsed last year.

In January House of Fraser, which specialises in designer brands, reported a 7.7 per cent rise in like-for-like sales for the six weeks to January 7, shrugging off rumours of an impending profit warning. But the company then joined other retailers in warning that trading conditions were expected to remain difficult during the first half of 2006 as household incomes are squeezed and costs are expected to rise.

Retailers have endured a tough start to the new year and many have been looking to merge. They continue to be attractive to private equity firms despite the consumer downturn.

HMV is the subject of a potential takeover by Permira, while Baugur recently bought a large stake in Woolworths prompting speculation that it would make a bid. In the past two years Somerfield, Big Food Group and Whittard of Chelsea have all gone private.

House of Fraser’s shares have risen 27 per cent since May after the group renegotiated its store card and opened new, more profitable stores, bought smaller rivals Jenners.

The underperforming department stores Dickins & Jones and Barkers of Kensington were also closed.

Mr Coleman was appointed chief executive in 1996, after the company floated in 1994.

In March 1985 House of Fraser was bought by the Al Fayed family in a £615 million deal. The group orignally included Harrods, which the family, has kept under private ownership.

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