Debenhams faces surprise bid

Debenhams is the next UK store to face a bid

The UK department store Debenhams says it has received a takeover bid, valuing the company at £1.5bn.

It confirmed that private equity firm Permira Advisers had made an indicative offer of 425 pence per share in cash.

Debenhams reacted cautiously to the offer, which amounts to a 28% premium on the closing price of its shares on Friday.

"This indicative proposal is preliminary and subject, inter alia, to due diligence and financing, and consequently, there can be no certainty that a firm offer will be made," it said in a statement.

Shares in Debenhams jumped on the news, hitting a 19-month high. At 1020 GMT, they were up 26% at 418p.

Retail frenzy

The offer comes on the same day that upmarket store Selfridges agreed to a £598m takeover bid by Canadian billionaire Galen Weston.

Selfridges has been at the centre of bid speculation for some time, amid a flurry of interest in the retail sector during recent months.

Harvey Nichols voted to go private in December, while Allders agreed to a takeover by a consortium led by property firm Minerva Plc.

Permira, which is making the offer for Debenhams, recently bought the Travelodge and Little Chef businesses for £712m.

Previously, it had bought the Homebase DIY chain, before later selling it at a profit.

Debenhams sales

In April, Debenhams reported that it had made a good start to its second half of the year.

Its own-label designer clothes helped to boost the company's results.

Like-for-like sales - which ignore the effects of new store openings - gained more than 3% in the first six weeks of its fiscal second half.

This year has been tough for UK retailers, with the war in Iraq and the global economic slowdown.

Signs of a cooling in the housing market could also lead to a downturn in High Street spending.