Baugur Group

Baugur Group hf

Company type	Private
Industry	Retailer, Real estate
Founded	Reykjavík, Iceland (1998)
Fate	Administration
Headquarters	Reykjavík , Iceland
Key people	Jón Ásgeir Jóhannesson, CEO
Products	Retailer, Investment company
Website	www.baugur.is

Baugur Group (/ˈbaʊɡər/; Icelandic: [ˈpœyːɣʏr̥]) was an Icelandic investment company. The group began as a supermarket and general retail company in Iceland, before diversifying to own a number of businesses at its peak, primarily in the United Kingdom.

Baugur was heavily affected by the Icelandic financial crisis that began in 2008, and applied for bankruptcy protection in February 2009. Its largest creditor Landsbanki applied to place Baugur's UK arm, BG Holdings, into administration that month.^[1] The group filed for bankruptcy in March 2009.^[2]

History

In 1989, the Baugur Group was started by the opening of a single 'Bónus' supermarket in Reykjavík by Jón Ásgeir Jóhannesson and his father, Jóhannes Jónsson. The company grew quickly and within three years was operating several supermarkets in Iceland. In 1992, Hagkaup, the leading domestic retailer, acquired 50% of shares in Bonus. In 1993, they merged and formed a joint purchasing company named Baugur.

Hagkaup was established over 50 years ago and, as a retailing pioneer, opened both supermarkets and department stores in Iceland. Hagkaup and Bonus merged as Baugur in 1998 and Jón Ásgeir Jóhannesson became the company's President and CEO. Baugur was listed on Iceland Stock Exchange the same year.

In 1999, Baugur signed franchise agreements with the Arcadia Group and Debenhams for Scandinavia and today Hagar, (formerly Baugur-Iceland) runs several Topshop and Miss Selfridge stores in Iceland and Sweden as well as three Debenhams stores.

Baugur changes to Baugur Group

In 2002, proposals were approved concerning a change in the name of Baugur hf. to Baugur Group hf. and changes to the company's organizational structure.

Baugur hf. was divided into three independent profit centres: Baugur-Iceland, Bonus Stores Inc., and Baugur-ID. Baugur hf. changed its name to Baugur Group hf. and became a holding company.

Baugur Group delisted from ICEX

In May 2003, a redemption offer worth 10.85 Icelandic krónur (£0.09) was made by Mundur, for the outstanding stock—Mundur holding company is backed by Gaumur, KB Banki, an Icelandic investment bank; and two private investors—and in July 2003, Baugur Group was delisted from the Iceland Stock Exchange.

The year 2003 was a milestone in Baugur Group's foreign operations. At the beginning of the year, Baugur Group held shares in a few listed companies in Britain, whereas, at the end of the year, it was the most internationally extensive Icelandic company.

Briefly, it can be said that Baugur Group's investment activities in Britain can be split into two categories. On one hand, Baugur Group continued to invest in listed companies that are regarded to have better futures, either because their current management is in the process of improving the company's operation, or because new shareholders are expected to step in to instigate improvement. Among the companies, which Baugur Group has invested in on these premises are the Big Food Group, House of Fraser, and Somerfield.

On the other hand, Baugur Group has formed a strategy to take part in management takeovers. These companies control strong brand names and are considered to have substantial opportunities for growth, show a net profit, and management has shown and proven its ability to succeed. During the year 2003, Baugur Group acquired three such companies: Hamleys, Oasis, and Julian Graves.

In May 2004, Baugur Group, along with other investors, acquired the majority in the British jewellery chain Goldsmiths, in cooperation with the company's management, for the amount of ISK 14.4 billion. Goldsmiths, which was established in Newcastle upon Tyne in the year 1778, operates 165 jewellery stores in Britain and is the second largest in the country in its sector.

In June 2004, the founders of Karen Millen agreed to sell the business to the Oasis Group (controlled by Baugur Group) in a deal valued at £120 million, creating a leading womenswear retailer with four strong brands—Oasis, Coast, Karen Millen, and Whistles; creating a group with over £350 million in sales in 550 stores.

Oasis is aimed at independent, fashion-conscious 18- to 30-year-old women and operates from 281 outlets across 14 countries, including the Republic of Ireland, the UK and France; Coast is a destination brand for women's special occasion clothes with 135 outlets; Karen Millen has a niche position away from the mass market, bordering on the designer brands; and Whistles has more-grown-up styling and quirkier taste than the rest of the high street. Later, the Oasis Group changed its name to Mosaic, listed on the ICEX.

Accounting irregularities

In 2002 Baugur's headquarters were the subject of a police raid.^[3] In July 2005 company founders Jón Ásgeir Jóhannesson and Jóhannes Jónsson were charged on 40 counts ^{[citation needed]} including tax and accounting irregularities, fraud and embezzlement.^[4] Jón Ásgeir Jóhannesson has accused the then prime minister, Davíð Oddsson of orchestrating a vendetta against him.^{[citation needed]} The case became known in Icelandic as the 'Baugsmálið' ('Baugur case').

On 3 May 2007, Jón Ásgeir was found guilty on a single charge of a breach of book-keeping rules, with the conviction being upheld on appeal on 6 June 2008.^[3][5] Jón Ásgeir was given a 3-month suspended prison sentence. It also left his position as chairman uncertain under Icelandic law because the conviction meant that he could not serve on any company board for 3 years.^[3] As a consequence of this, and the fact that much of Baugur's portfolio was now based in the UK, in July 2008 Baugur considered relocating to the UK, where Jón Ásgeir could keep his board position.^[4][6]

Demise and collapse

See also: 2008–11 Icelandic financial crisis

It emerged in October 2008 that BDO Stoy Hayward was advising Baugur on restructuring and that Philip Green, the owner of Bhs and the Arcadia Group had travelled to Iceland for negotiations regarding him making an investment in Baugur, amid reports the group was on the brink of collapse^[7][8]

On 4 February 2009, Baugur applied for protection from its creditors after restructuring negotiations with Landsbanki broke down. The bank also applied for Baugur's UK arm to be put into administration.^[9]

Ownership and links to Russia

In December 2002 Gaumur Holding acquired a 30.97% stake in Baugur Group.^[10]

Luxembourg-registered Gaumur Holding was originally Compagnie Financiere pour l'Atlantique du Nord. The company was registered on 22 June 1998. In March 2000 changed its name to Gaumur Holding.^[11]

Official records show that Gaumur Group had three shareholders:^[12]

• Starbook International Limited (P.O. Box 3186 Road Town, Tortola, British Virgin Islands)
• Waverton Group Limited (P.O. Box 3186 Road Town, Tortola, British Virgin Islands)
• Birefield Holdings Limited (P.O. Box 3186 Road Town, Tortola, British Virgin Islands)

In 2005 Danish media reported that behind Starbook, Waverton and Birefield is Shapburg Limited (registered in the same mailbox 3186) and Quenon Investments Limited (registered in the same mailbox 3186). It was discovered that:

• Both companies owned a stake in Baugur Group.^[11]
• Both companies owned a stake in the Luxembourg-registered Compagnie Financiere Scandinave. A month after incorporation it was renamed the Scandinavian Holding and later Meidur S.A. (later Exista).^[11]
• Both companies owned a stake in Alrosa Finance in Luxembourg. Another shareholder was Russian state-owned diamond company ALROSA.^[11]
• Shapburg Limited owned a stake in Alfa Finance Holdings. Another shareholder was Alfa-Bank of Russia.^[11]

Icelandic businessmen Björgólfur Thor Björgólfsson, Björgólfur Guðmundsson and Magnús Þorsteinsson all came to London from Saint Petersburg, Russia where they did business in the beverage sector together.^[11]

Former assets

• 365 - sold April 2008^[13]
• Arcticgroup
• Aurum^[14]
  • Goldsmiths
  • Mappin & Webb
  • Watches of Switzerland
• Booker Group - sold June 2008.^[15]
• Scandinavian Design & Retail
• Steinunn
• Matthew Williamson
• Day Birger et Mikkelsen
• Souk
• eCommera
• Saks
• French Connection
• Iceland supermarket^[16]
• Wyevale Garden Centres^[16]
• Hamleys^[14]
• Magasin du Nord department store (83% with Straumur Investment Bank and B2B Holdings)
• Visual Communications Group
• Illum department store
• Jane Norman - bought 29 July 2007 for £117m; filed for bankruptcy administration 27 June 2011^[17][18]
• Julian Graves - sold to Holland & Barrett in September 2008.^[19]
• All Saints
• Debenhams (13%)^[14]
• Hagar - sold back to Johannesson family in July 2008.^[20]
• House of Fraser - (35%)^[16]
• FL Group - sold April 2008^[13]
• Hjálmur - sold April 2008^[13]
• Humac - sold April 2008^[13]
• Merlin - sold to Árdegi in June 2007.^[21]
• MK One - sold to restructuring specialist Hilco in May 2008.^[22]
• Moss Bros - Baugur sold its 28.5% shareholding sold to Arcadia Group in November 2008^[23]
• Mosaic Fashions (49%) ^[16] (entered administration on 2 March 2009)^[24]
• Newsedge - sold April 2008^[13]
• Saga Film - sold April 2008 ^[13]
• Somerfield (3%) - The Co-operative Group bought the entire Somerfield chain in July 2008.^[25] Baugur made an unsuccessful attempt to buy Somerfield in 2005^[26]
• Teymi - sold April 2008^[13]
• Woolworths Group plc (12.4%).^[27] Share trading suspended 26 November 2008,^[28] with retail chain Woolworths and distribution arm Entertainment UK being placed into administration.^[29]
• Whistles - Sold to Jane Shepherdson in January 2008^[30]
• Whittard of Chelsea - Placed into administration on 23 December 2008, and subsequently sold to EPIC private equity.^[31]
• Woodward Foodservice - Sold to Brake Bros Ltd in August 2008^[32]
• Wyndeham Press Group - Sold to Walstead Investments Limited in December 2008.^[33]

Board of directors

• Hans Christian Hustad
• Hreinn Loftsson (Chairman)
• Gudrún Pétursdóttir (Alternate Board Member)
• Kristín Jóhannesdóttir
• Þórður Bogason (Secretary of the Board)
• Ingibjörg Stefanía Pálmadóttir
• Jóhannes Jónsson
• Einar Thór Sverrisson - Alternate Board Member

References

1. Thompson, James (7 February 2009). "Baugur admits defeat as UK arm falls into administration". The Independent. Retrieved 31 December 2014.
2. Hall, James (11 March 2009). "Baugur files for bankruptcy". The Daily Telegraph. Retrieved 31 December 2014.
3. Baugur boss loses court appeal, International Herald Tribune, 2008-06-07
4. Baugur investigates switch to UK, BBC News, 2008-07-04
5. Baugur CEO and former assistant director found guilty, Iceland Review, 2007-05-04, archived from the original on 2012-02-17, retrieved 2009-02-04
6. Baugur Plans to Relocate to U.K. After Iceland Exit, Bloomberg, 2008-07-04
7. Wood, Zoe (2008-10-12), "Philip Green steps in to save Baugur", The Guardian, London, retrieved 2010-04-26
8. Fletcher, Richard (2008-10-14), "Baugur in talks with restructuring experts", The Daily Telegraph, London, retrieved 2010-04-26
9. "Hamleys investor seeks protection". BBC News. 2009-02-04. Archived from the original on 5 February 2009. Retrieved 2009-02-04.
10. "Fjárfestingarfélagid Gaumur ehf. discloses holding in Baugur Group hf". Archived from the original on 2011-07-27. Retrieved 2010-04-07.
11. "Россия желает спасать Исландию из-за давних офшорных связей чиновников и бизнесменов". The New Times. 2008-10-21.. Another copy: "Зачем Россия спасает Исландию". Rususa. 2008-10-21. Archived from the original on 2011-07-15.. An automatic translation: "Discussion of the relationship between Iceland and Russia from the Russian newspaper". Archived from the original on 2008-10-23. Retrieved 2010-04-07.
12. C - N° 205 / 25 mars 1999. Government of Luxembourg
13. Baugur completes restructuring as a pure Retail investor and builds new investment pool, Baugur, 2008-04-08, archived from the original on 10 February 2009, retrieved 2008-12-27
14. Wood, Zoe (2008-10-12), "From hero to size zero: the Baugur crisis", The Guardian, London, retrieved 2008-12-27
15. Baugur sells Booker stake as part of focus on retail, Retail Week, 2008-06-24, archived from the original on 9 February 2009, retrieved 2008-12-27
16. Finch, Julia (2008-10-17), "House of Fraser says it would buy Baugur stake", The Guardian, London, retrieved 2008-12-27
17. "Jane Norman Is Latest High Street Casualty". Sky News. 27 June 2011.
18. Mesure, Susie (2007-07-30). "Baugur buys Jane Norman for £117m". The Independent. London. Archived from the original on 9 February 2009. Retrieved 2008-12-27.
19. Holland & Barrett buys Julian Graves, Retail Week, 2008-09-17, retrieved 2008-12-27
20. Hall, James (2008-07-04), "Baugur to relocate to the UK with Jon Asgeir Johannesson at the helm", The Daily Telegraph, London, retrieved 2008-12-27
21. Icelandic company Árdegi hf buys Baugur Group shares in Merlin, Baugur, 2007-06-28, archived from the original on 10 February 2009, retrieved 2008-12-27
22. Lynam, Joe (2008-05-02), Invoice worries as MK One is sold, BBC News, archived from the original on May 5, 2008, retrieved 2008-12-27
23. Kollewe, Julia (2008-11-13), "Philip Green pays £6.7m for Baugur's stake in Moss Bros", The Guardian, London, archived from the original on 22 January 2009, retrieved 2008-12-27
24. "Mosaic firms into administration". BBC News. 2009-03-02. Archived from the original on 3 March 2009. Retrieved 2009-03-02.
25. Co-op buys Somerfield for £1.57bn, BBC News, 2008-07-16, archived from the original on 22 January 2009, retrieved 2008-12-27
26. Baugur pulls out of Somerfield bidding, The Scotsman, 2005-07-04, archived from the original on 9 February 2009, retrieved 2008-12-27
27. Thompson, James (2008-08-19), "Baugur: the iceman cometh...", The Independent, London, archived from the original on 3 December 2008, retrieved 2008-12-27
28. Woolworths shares are suspended, BBC News, 2008-11-26, archived from the original on 25 December 2008, retrieved 2008-12-27
29. Brown pledges Woolworths support, BBC News, 2008-11-27, archived from the original on 18 December 2008, retrieved 2008-12-27
30. Shepherdson completes Whistles MBI, Drapers, 2008-01-28, retrieved 2008-12-27
31. Whittard sold to private equity, BBC News, 2008-12-23, archived from the original on 26 December 2008, retrieved 2008-12-27
32. Brakes closes two Woodward depots, The Grocer, 2008-11-22, retrieved 2008-12-27
33. Walstead Investments buys UK printing business Wyndeham, AltAssets, 2008-12-09, retrieved 2008-12-27^{[permanent dead link‍]}

External links

• Baugur's home page (in Icelandic and English)
• Ekstrabladet article on Russian connections^{[permanent dead link‍]}
• Financial Times article about the legal battle in Iceland
• Iceland Review on Baugur