Department store chain House of Fraser could be in line for a higher takeover offer, after rejecting an initial bid on Friday, according to newspaper reports.

The group, which has 52 stores in the UK, turned down an approach from TBH investments last week saying the offer on the table was too low.

However, newspaper reports have suggested its rejection may now spark a higher offer from the Scottish entrepreneur behind the bid, Tom Hunter.

TBH investments said it was considering a bid of 85p per share, valuing House of Fraser at about �197m ($303m).

A tight-knit band of entrepreneurs is attempting to dominate the re-shaping of the high street

Financial Times

House of Fraser rejected the offer, adding that it had been timed "to cause maximum disruption during the Christmas trading period".

But weekend newspaper reports suggested that Mr Hunter may now increase his bid when he meets the retailer's directors this week, while the Financial Times said the move was part of a move part of bigger plans to merge House of Fraser with smaller rival Allders.

Inside job

TBH Investments is part of private equity group West Coast Capital, led by Mr Hunter.

(House of Fraser) needs a fresh retailing approach and substantial long-term investment

Tom Hunter

TBH already owns 4.7% of House of Fraser, and said Icelandic retail group Baugur, which holds an 8% stake in the store, would support any offer it made.

Baugur launched an unsuccessful bid earlier this year for Arcadia, the retail group which owns High Street clothing chain Topshop.

Mr Hunter, who sold his Sports Division retail chain to JJB Sports four years ago, said House of Fraser "needs a fresh retailing approach and substantial long-term investment".

A report in The Times newspaper on Saturday suggested Mr Hunter would now raise his bid while the Sunday Herald suggested he was flying down to meet the board to discuss the offer on Monday.

Big plans

However, a report in the Financial Times on Saturday suggested bigger plans may be behind Mr Hunter's bid.

The newspaper said the "restructuring of the UK department store sector" was gathering pace and suggests that the eventual plan is to merge House of Fraser with smaller rival Allders.

Allders is at the currently at the centre of a takeover approach from property group Minerva.

But the FT said: "A tight-knit band of entrepreneurs is attempting to dominate the reshaping of the high street."

Private sector

Mr Hunter argued that House of Fraser stood a better chance of turning itself around as a private company, "particularly in the current retailing environment".

Rival department store group Harvey Nichols is set to revert to private ownership later this month after the company's chief executive bought out the firm's shareholders.

House of Fraser's chain, the UK's third biggest department store group, includes the Dickens & Jones and Army & Navy outlets.

Although sales have been rising in recent months, the company lost �2.7m in the six months to late July, up from �1.5m during the same period last year.