With the addition of MK One to its expanding UK empire, Icelandic retail group Baugur is becoming an increasingly significant force in UK fashion. Robert Carruthers charts the Scandinavian success story.

Throughout British history, a visit from our fearsome, horn-helmeted Nordic neighbours, the Vikings, has meant only one thing – carnage. Their arrival was always the cue to hide your daughters, bury your silver and ready yourself for fire and the sword. Nowadays, however, things are different. Instead of making off with our womenfolk, they’re here for our womenswear. Last month, with its £55m purchase of budget fashion chain MK One, Icelandic media-to-fashion investment company Baugur signalled without doubt that it has beached its longships and is here to stay and build a substantial empire.

The success of raiders from a volcanic outcrop with a tiny population (the size of Bradford) in becoming an increasingly important force on the UK high street has been as surprising as it has been rapid. It started back at the end of 2001, when it emerged that Baugur, then practically unknown on the UK retail scene, was proposing to offer £570m to take over the Arcadia Group.

The move proved abortive, but the 20% stake

it acquired eventually landed it with a reported profit of £65m when Philip Green later bought the same group in September that year for £200m more. Since then Baugur has gone on to make often savvy investments in Mothercare, Selfridges and House of Fraser, as well as supermarket chain Somerfield and JJB Sports. The common factor has often been acquisition at a knock down price, followed by a later rapid stock recovery or even takeover bid.

Apart from MK One, it now owns Mosaic – parent of Oasis, Karen Millen, Coast and Whistles – the Goldsmiths jewellery chain, toy retailer Hamleys and health products chain Julian Graves. Not only that, it has a large stake in Big Food Group, owner of frozen foods merchant Iceland (evidence the Vikings may have a sense of humour), as well as hanging onto its slice of Somerfield. Its interests in UK-based retail do not stop there either. It is a major shareholder in Icelandic retail group Hagar, which operates franchise stores for TopShop, Miss Selfridge and Debenhams, among others.

And the hectic pace of Baugur’s expansion has yet to relent, with Big Food Group possibly next in line to be purchased outright and exclusive negotiations to buy Rubicon, the owner of the Principles and Warehouse chains, unveiled at the end of October. Although it missed out on Hobbs (sold to venture capitalist 3i), a bid for LK Bennett remains an outside possibility. >>

But what of the 36-year-old chief executive himself? Ambition is the key word. Jon Asgeir Johannesson started Baugur only 15 years ago, when he left business school at the age of 21, borrowed £8,000 and opened a food shop, Bonus, which aimed to beat everyone else on price. Within three years, Bonus had become a national chain. Other business ventures soon followed, and he had his first taste of UK fashion with the opening of the franchise stores for Arcadia group brands and Debenhams.

He is supposed to be particularly shy of the limelight, but then who wouldn’t be when the newspapers are just itching to unearth a scandal. With his rumoured arrogance, shoulder-length hair, habit of dressing head-to-toe in black, and, let’s face it, outrageous success, he seems a perfect target for a spiteful hack attack. They’ve had a go already, with reports about his enjoyment of the wrong kind of female company and in 2002, he and another Baugur executive were subjected to investigation by the Icelandic fiscal authorities, although nothing came of this. Despite attempts to characterise him as a bit of a playboy, he is rumoured by those who’ve met him to be rather dour. So far, Johannesson remains an enigmatic figure without much of a public profile, probably because he’s too busy working out how to buy his next slice of the UK high street to worry about much else or have any time to misbehave.

The impact of the Icelander’s long-delayed round of Viking raiding (the last since 1066, when retail was apparently largely unaffected) is turning out to be rather more beneficial than past British history might suggest. Johannesson has failed to behave in the same way as some of the UK’s own cash-hungry venture capitalist types with their slash and burn, kick-the-suppliers strategies.

The stated policy of Baugur, which is often backed by stolid Icelandic bankers in its purchases, is one of “buy and build”. At a retail conference in October, Johannesson described Mosaic as “a prime candidate for flotation further down the road”. Although he said he was taking a more relaxed five-year time frame, others close to the group say two years could be nearer the mark.

Coming from a small country, Baugur necessarily has a more internationalist outlook. It takes the view that British retail brands have more potential to be exploited in an international market than has hitherto been realised. That was expressed in the middle of last month when it bought MK One, saying it would look to exploit the chain’s potential both in the UK and across the Nordic region. In this country alone, this will mean 50 new stores in the next two to three years and for Mosaic the group is promising 280 stores outside the UK in the next four years, which is a pretty daring objective by anybody’s measure.

So the result of the Icelandic invasion looks like being the injection of a bit of swashbuckling capitalism of the more adventurous kind. In a UK retail market heading for a slowdown, that may be a good thing in that it opens up new horizons and puts fashion chains in a more expansive mood. On the other hand, with such a rapid pace of acquisition, it means Baugur could overreach itself if it fails to keep hold of the management talent running its new purchases – a significant danger in retail empire-building. If that does happen, the weapon the new Viking arrival is wielding over the UK fashion sector could turn out to be a double-edged sword.