Japan's Fast Retailing Co yesterday dropped out of the bidding war for Barneys New York Inc, clearing the way for Dubai firm Istithmar PJSC to buy the upscale US department store for US$942.3 million.
The defeat is a blow to the ambitions of the Japanese group to expand its operations overseas in the aim of being a global name in retail clothing.
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 Inc, a company spokesman said.
"In short, we are beginning to see a disparity between the value we find in the company and the price we would have to offer to acquire the company," Fast Retailing spokesman Terunobu Aono said.
"It is no longer rational from an economic standpoint," he said.
Fast Retailing entered the bidding for Barneys last month, topping an initial US$825 million 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 United Arab Emirates.
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 US$168 million 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 on Sunday raised its bid for Barneys to US$950 million from US$900 million, underscoring its determination to snare the prestigious New York retailer.
Istithmar's later US$942.3 million offer was considered more attractive because Jones Apparel would have been required to pay the Dubai firm a US$34.7 million contract termination fee if it accepted the rival bid.
Fast Retailing's Uniqlo chain flourished during Japan's decade-long slump in the 1990s by selling cheap yet good quality clothing, mainly made in China.
The chain has since branched out in China, Britain and 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 No. 1 casual wear company.