Nov. 12 (Bloomberg) -- Debenhams Plc, Britain’s second- largest department-store company, plans to buy Denmark’s Magasin chain for 12.3 million pounds ($20 million), the first time the retailer will have its own outlets outside the U.K. and Ireland.

The six-store chain, including the iconic Magasin store in Copenhagen’s city centre, will be acquired from Magillum A/S, a company controlled by Icelandic bank Straumur and investor Alshair Fiyaz, Magillum director Vincent de Canniere said by phone. Debenhams will run the stores under a 25-year lease from property owner Solstra Holding A/S, owned by Straumur and Fiyaz.

Magasin, which was previously owned by failed Icelandic investment firm Baugur Group Hf, will “benefit materially” from Debenhams’ ownership, said KBC Peel Hunt analyst John Stevenson. The British retailer runs 52 international stores in 17 countries under franchise arrangements and has 145 U.K. and Irish outlets. The Magasin stores had sales of 228.7 million pounds last year and will maintain their store brand after the purchase.

“It’s a good acquisition from the point of view that it’s a cheap price,” Caroline Gulliver, an analyst at Execution Ltd. said by phone. Magasin “is a quality brand,” comparable with Britain’s John Lewis Partnerhip Plc, the biggest U.K. department- store chain, she said. Gulliver has a “buy” recommendation.

Chief Executive Officer Rob Templeman said in October that Debenhams had about 100 million pounds left over from a sale of shares to buy department stores and brands that could be sold in its stores. The retailer plans to add its most-profitable own- bought designer ranges, such as John Rocha and Matthew Williamson, into Magasin stores to boost earnings.

‘Good Acquisition’

Debenhams climbed 2.45 pence, or 3 percent, to 84.45 pence at 11:55 a.m. in London trading. The stock has more than tripled in value this year.

The U.K. retailer bought nine stores from Ireland’s Roche Stores in 2007 and converted them to its brand.

“The success of our international business demonstrates that there is demand for our own bought and Designer brands outside our home market which we believe will complement Magasin’s existing brands,” Templeman said. “We anticipate that this acquisition will be highly accretive for shareholders.”

The retailer previously supplied Magasin with some of its brands under Baugur and saw “strong demand”, Debenhams spokesman Jonathan Brill said by phone.

“They’ve picked it up for a bargain,” said Adam Cochrane, an analyst at UBS AG in London. Risks involved in the transaction include “taking on the leasehold of the stores” and potential weakness in Denmark’s retail market, he said.

Danish retail sales fell 1.7 percent in September compared with the previous month, according to Statistics Denmark.

Christmas Decorations

Magasin opened its first store in Aarhus, Denmark’s second- largest city, in 1868 and followed with a Copenhagen store two years later, on one of the capital’s main squares. The Copenhagen store introduced the first elevator in Scandinavia in 1895 and became famous for its annual Christmas decorations.

The site of the store was originally a hotel, where Denmark’s most-translated author, Hans Christian Andersen, wrote some of his fairy tales.

“This deal is opportunistic, in that Magasin is a bank- owned retailer following the fallout from Baugur’s collapse,” KBC’s Stevenson said in a note. The acquisition may add as much as 10 million pounds to earnings before interest and tax, he added. Stevenson has a “buy” rating on Debenhams.

With reporting by Christian Wienberg in Copenhagen. --Editor: Paul Jarvis.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

Last Updated: November 12, 2009 07:47 EST