The leading candidate is N Brown, the Manchester mail order company controlled by Sir David Alliance, who has made no secret of his interest in acquiring Freemans. Though other possible buyers could include Pinault Printemp-La Redoute, which owns the Empire stores operation in the UK, and Otto Versand, the German group which owns Grattan, N Brown is considered by analysts as being the most serious bidder.
Littlewoods withdrew from the fray after it was told that Sears was in active negotiations with other parties. Littlewoods had insisted on exclusive negotiation rights and was thought to be angered by Sears' actions.
Sears said it had received approaches from "a number of parties". Though N Brown, is the frontrunner it is understood that Lanica Trust, the tiny investment vehicle controlled by 31-year-old Andrew Regan had been interested, though it is not clear if he has made a formal approach.
There is speculation that any delay in the deal could spell the end for Sears' chief executive, Liam Strong, who has been under pressure from institutions frustrated at the group's lacklustre performance.
He has been keen to sell Freemans quickly in order to fulfil his promise of returning pounds 410m to shareholders. The Littlewoods deal hit a snag when it was unexpectedly referred to the Monopolies and Mergers Commission last month.
Mr Strong emphasised the need for speed yesterday: "It remains the board's intention to achieve the price expected for Freemans and to return the cash to ordinary shareholders. We are committed to achieving this in the shortest possible timeframe."
Though Sears shares fell 0.5p to 81.5p on the news, analysts said the development should be viewed positively. "Initially it seems to suggest that Sears can't close deals. But really it is that Sears has committed itself to returning pounds 410m to shareholders and is looking at the best way to achieve that."
Littlewoods said it was disappointed with the outcome but said it was still interested in buying Freemans if Sears' other options collapsed. "We still want to do this deal with them but felt that if they did not want to negotiate with us exclusively then there was no reason to pursue it."
Littlewoods has informed the MMC that its discussions with Sears have been terminated. However, it is still possible that the MMC will continue its investigation. It can ask the DTI to lay aside a merger inquiry if it is satisfied that the merger has been terminated. With no formal confirmation yet received from Littlewoods, the MMC said that "at the moment we still have an on-going inquiry".
Littlewoods said the collapse of its deal had no implications for the proposed sale it announced earlier this week of its high street stores, which it is hoping will fetch up to pounds 600m. However, analysts said the position was now "more interesting" and questioned whether Littlewoods would be able to find a buyer for the whole chain at the price it is seeking.
The capture of Freemans would mark a coup for N Brown, which occupies a small niche in direct mail order catalogues aimed principally at older customers. But though it is relatively small, it is regarded as one of the most efficient mail order groups in the country with state-of-the- art database management skills and distribution systems.
The company mounted a pounds 1bn-plus bid for the Littlewoods empire in 1995 in conjunction with Iceland. Though rejected by the group's family shareholders, that deal would have seen N Brown take the home shopping division, with Iceland retaining the high street stores while the Littlewoods pools business would have been sold.
N Brown has a market share of slightly more than 4 per cent, and it is unlikely that its purchase of Freemans, which has 8 per cent, would attract the attention of the competition authorities.