June 11 (Bloomberg) -- Galen Weston's $1 billion bid for Selfridges Plc, a luxury-goods retailer that competes with Harrods and Harvey Nichols in London, may cost Canada's second-richest man as little as $5 million of his own money. Royal Bank of Canada, the country's biggest bank, is putting up the rest.

The Toronto-based bank agreed to lend Weston 99.5 percent of the 628.1 million pounds ($1.04 billion) he offered for Selfridges last month, according to loan agreements on file at Mayer, Brown, Rowe & Maw, his London lawyers. The documents, which as a bidder Weston had to make public, show he pledged the retailer's assets and his holding company as collateral.

Giving Weston that much leverage may give Royal Bank a better shot at winning business from his corporate holdings, which include North America's third-largest maker of baked goods and Canada's biggest grocery-store chain. Weston's last big purchase, the $1.77 billion acquisition of Unilever's U.S. baking business in 2001, was financed by Canadian Imperial Bank of Commerce, where he sits on the board.

``That's called competition,'' said Doug Davis, who as president of Toronto-based Davis-Rea Ltd. oversees C$470 million ($346 million) in assets, including shares of Royal Bank and Weston's George Weston Ltd. ``Banks are in the business of lending money to good credits, and Weston is probably one of the best credits in the country.''

Weston, 62, didn't get enough support from Selfridges shareholders to complete the purchase by his original deadline of last week. He owned or had received commitments for 25.7 percent of the retailer's stock as of Thursday and extended his offer of 387 pence a share for two weeks.

Waiting for Tchenguiz

Some investors said they're holding out for another bid.

Robert Tchenguiz, an Iranian-born investor whom the Sunday Times has estimated is worth 400 million pounds with his brother, last month indicated he may offer more. Weston is the world's 43rd- richest person, with a fortune of $6.2 billion, according to Forbes magazine. He ranks second in Canada to Ken Thomson, the controlling shareholder in publisher Thomson Corp.

``You can't rule out another bid,'' said Rupert Trotter, an analyst at Edinburgh-based ISIS Asset Management, which owns Selfridges shares.

Weston has a history in high-end retailing. He controls Canadian luxury-goods department store Holt Renfrew and Ireland's Brown Thomas, and his family owns London's Fortum & Mason on London's Picadilly. Selfridges, which generates 80 percent of its sales in London, also has two stores in Manchester and plans to open a Birmingham location in September.

Most of Weston's fortune is tied to George Weston, the baked- goods maker his grandfather founded. His 62.5 percent stake in the company, held by Wittington and its affiliates, has a market value of C$8.71 billion. Weston is chairman and chief executive of George Weston and chairman of Loblaw.

Two Loans

Royal Bank is financing Weston's bid through two 18-month loans, according to the documents at Weston's lawyers. The first, for 225 million pounds, will be to Wittington Investments Ltd., a holding company for Weston's investments. The second, for 400 million pounds, will be made to Oxford Acquisitions Ltd., a Wittington unit established to acquire Selfridges.

The loan to Wittington will be guaranteed by the assets of Selfridges, including an 807,000-square-foot department store on London's Oxford Street and 250-room hotel. Wittington will guarantee the loan to Oxford Acquisitions.

Weston is borrowing the 225 million pounds at the London Interbank Offered rate plus three-quarters of a percentage point. The second loan is priced at the Canadian prime lending rate, or the interest rate commercial banks charge their preferred customers, plus three-quarters of a percentage point.

Both spreads will increase in steps from 75 basis points to between 135 and 350 at 15 months, depending on how profitable Selfridges is, the documents show. Royal Bank plans to syndicate, or sell parts of, the Wittington loan to other banks. The excerpts don't say whether Royal Bank intends to syndicate the Oxford loan.

A-Rated

Wittington's debt isn't publicly rated. Loblaw Cos., Canada's biggest supermarket chain, has an A rating from Standard & Poor's. George Weston, the bakery and Loblaw's parent, is rated A-.

Royal Bank spokesman Paul Wilson and Rupert Younger, a London spokesman for Weston, declined to comment further.

Few individual investors can borrow on similar terms, analysts said. Billionaire Philip Green is one. He financed 92 percent of the 850 million pounds he paid for British retailer Arcadia Group Plc last year through a loan provided by HBOS Plc, the U.K.'s fourth-biggest bank, paying 2.25 percentage points over Libor.

Last Updated: June 10, 2003 19:03 EDT