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Dubai firm to take Barneys as Japanese bidder quits

The defeat is a setback to the ambitions of the Japanese no-frills clothing giant to become a global name in apparel retailing.

Fast Retailing, which operates the Uniqlo chain of stores, decided not to trump the latest offer from the Dubai investment fund to buy Barneys from its US owner Jones Apparel Group.

Fast Retailing spokesman Terunobu Aono said the company was concerned about overpaying for the business.

A higher offer “is no longer rational from an economic standpoint,” he said.

Fast Retailing entered the bidding for Barneys last month, topping an initial 825-million-dollar offer from the Dubai firm.

But it was up against a powerful rival bidder. Istithmar is part of a conglomerate owned by the government of the Gulf emirate of Dubai, one of the seven members of the oil-rich United Arab Emirates.

“If Fast Retailing offered a new bid, then another offer would have inevitably followed from Istithmar,” said Machiko Amano, a retail analyst at the credit ratings agency Standard & Poor’s.

“With an escalating bidding war, there was also the risk that the terms of the deal would not turn out to be profitable,” she added.

The takeover battle marked another twist in the history of the New York retailer that was started in 1923 by Barney Pressman and went through bankruptcy in the 1990s with heavy losses for Japanese investors.

In the mid-1990s, Japan’s Isetan posted losses of 168 million dollars from loans to Barneys.

Under the Jones group, Barneys operates flagship stores in New York, Beverly Hills, Chicago, Boston and Dallas as well as several regional “warehouse” stores and others under the Barneys Co-Op name.

Fast Retailing’s Uniqlo chain flourished during Japan’s decade-long slump in the 1990s by selling cheap yet good quality clothing, mainly manufactured in China, as years of deflation made consumers more frugal.

In 2001 its chief executive Tadashi Yanai predicted that his company would be “bigger than Gap”.

The chain has since branched out in China and Britain as well as France and recently announced plans to open a flagship London store as part of its goal of overtaking industry leaders such as Zara and Hennes and Mauritz (H & M) to become the world’s number one casual wear company.

“I don’t think this (setback) means Fast Retailing will reduce its overseas expansion or change its business strategy -- on the contrary, it will try to further boost its operations,” said Amano at S and P.

The renewed push comes despite an earlier setback overseas for Fast Retailing, which announced in 2003 that it would close 16 stores in Britain due to sluggish sales, just 18 months after entering the country.

In December 2005, it announced a move into French lingerie with a deal to buy Princess tam.tam brand-maker Petit Vehicule.