Dubai-based Istithmar is set to buy Jones Apparel Group Inc.'s Barneys New York for $942.3 million after Japanese casual-clothing retailer Fast Retailing Co. Ltd. on Thursday pulled out of the bidding war.

The retreat by Fast Retailing ended a month-long tug-of-war over the luxury department store chain, although the operator of the Uniqlo stores has no intention of slowing down its overseas expansion drive.

Jones Apparel, which also owns clothing, shoes and accessories brands such as Nine West, Gloria Vanderbilt and Jones New York, said on Wednesday it agreed to sell Barneys to Dubai-owned private equity firm Istithmar.

After the Tokyo market close, Fast Retailing issued a statement saying it would not submit a fresh bid, even though the company had until 5 p.m. on Thursday U.S. East Coast time (2100 GMT) to make a new offer.

The selling price more than doubles the $400 million that Jones Apparel paid for the New York fashion retailer in 2004.

Fast Retailing's latest bid of $950 million is higher than Istithmar's $942.3 million. But Jones Apparel is required to pay a break-up fee to the Dubai company if it sells Barneys to the Japanese firm, making Istithmar's bid favorable.

Ahead of the announcement, shares in Fast Retailing closed up 10.5 percent at 7,190 yen on expectations that its bid for Barneys would fall through.

Investors had worried that Barneys was overpriced and that it would be difficult to achieve operational synergies between Fast Retailing and the upscale fashion store.

I wouldn't say they are a perfect match. I don't see how they are going to create synergy effects, Mizuho Asset Management fund manager Yoshihisa Okamoto said ahead of the Fast Retailing announcement.

Fast Retailing's bid for Barneys underscores its determination to become a global player and find growth outside its mature home market.

Its expansion strategy has not changed despite the failed bid, a Fast Retailing spokesman said.

Having built up an empire of more than 700 stores in Japan, Fast Retailing has pledged to expand abroad and invest as much as 400 billion yen ($3.3 billion) over the next three years on M&As to almost double its annual sales to 1 trillion yen by 2010.

Chief Executive Tadashi Yanai told reporters in April that his company was looking to acquire a European clothing brand without naming specific targets.

Fast Retailing, whose Uniqlo brand has often been called the Gap Inc. of Japan, gave up on a bid for Hong Kong's Giordano last year.

But it gained a foothold in the U.S. market last year when it opened its first flagship store in New York City.

In China, Fast Retailing was reported to be interested again in a stake in Giordano, along with Hong Kong-listed Esprit, the South China Morning Post said in June.

($1=119.62 Yen)