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Baugur ready to take stock at Mosaic

I suppose it was only a matter of time before the Baugur machine slowed down to take a breath, and to take stock of what it had bought in its almost frenzied shopping spree in the UK retail sector in recent years.

Its reported plans to delist Mosaic Fashions from the Icelandic Stock Exchange later this year (where it appears in the ICEX-15, the main equity index of that market) seem to make a lot of sense, enabling it to complete the integration of the Rubicon businesses away from the public glare.

Mosaic is a very different business from the one Baugur acquired from PPM Ventures back in 2003, when it comprised just Oasis and Coast - and Baugur itself is a very different business. Karen Millen and Whistles were added in 2004 when the Mosaic name was introduced, followed by the Rubicon group last year, which comprises Warehouse, The Shoe Studio and Principles. What was right for the business four years ago might not necessarily be right for it now.

With sales of £853 million and a market capitalisation of approximately £373m, Mosaic is a top 10 asset on ICEX, and at the time of its float in 2005 was the only non-Icelandic business to be listed there. However, share trading in Icelandic assets in general is limited when compared with London, for instance, on both a domestic and international level.

Despite the recent boom in the Icelandic economy, it's still not a market that large institutional investors tend to target, which leaves Mosaic open to undervaluation. Apart from Baugur making a big statement in its home market, it's hard to see the benefits of keeping this listing.

If there is to be some attrition during the process of properly integrating Rubicon - which has not all been plain sailing, if we're to believe the many newspaper reports on the subject - then it's not something Baugur will want to do under the microscopic gaze of the public and its shareholders. But such is the interest in Baugur that it can't expect everyone to avert their eyes for three years before it reappears in its new lean and mean form on the London Stock Exchange, which is understood to be the plan.

The retail rumour mill has rumbled into action very quickly this week and the industry is already speculating on exactly what the restructuring process will mean for the group, and especially its management. Some obvious names have already been linked with a move to Mosaic which, if they come to pass, will create some interesting opportunities and challenges across the rest of the sector. All eyes will certainly be on this group for some time to come, though Baugur will be in the luxurious position of not having to tell us very much if it doesn't feel like it.

Another point of speculation is whether Baugur's appetite for acquisition will remain as strong as ever. It's difficult to say, but I wouldn't bet against another Baugur deal in the not-too-distant future. That Debenhams rumour, for instance, has been denied but it just won't go away.

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