Blacks Leisure, the struggling outdoor retailing group, has been forced to put itself on the market after shareholders refused to inject more cash into the business.
The company announced yesterday that it wished to "invite offers to support further investment in the group, which is most likely to involve a sale of the company or sale of one or more of the group's brands". This came after talks with shareholders about raising investment foundered.
The shares plummeted more than 50 per cent to 1.85p as the company revealed that, with debt at £36m, "there can be no assurance that any sale would attribute value to the ordinary shares of the group".
The decision to move to what company insiders called "plan B", is likely to pave the way for a pre-pack administration. The controversial insolvency procedure allows a company to collapse and then be bought quickly by a new owner, after its debts have been wiped out.
The accounting group KPMG, which was involved in an insolvency procedure that saved Blacks two years ago, has been called in to run the sale.
The company, which also owns the Millets chain, has been desperately tapping up its shareholders to raise additional cash. Analysts put the figure at about £20m, although Blacks has declined to name its exact target. The group said last month it was experiencing the worst retail environment it had ever seen.
As well as the need to raise cash, Blacks has been in negotiations with Lloyds Banking Group to renegotiate more than £40m worth of debts that fall due at the end of February.
The discussions have proved fruitless, forcing the company to put itself up for sale yesterday. One insider said: "There was good response from the shareholders, but there wasn't the support for the capital raising. The appetite wasn't there."
Sources close to the group would not be drawn on whether a pre-pack administration was imminent. One source said: "All focus is on a sale. These are strong brands and it is still a market leader."
Last year the company turned down a 62p-a-share bid from Sports Direct, owned by the Newcastle United chairman Mike Ashley. Sports Direct has a 21 per cent holding in the group.
The sources close to Blacks said the previous management team could not recommend it to shareholders as "so many conditions had been attached".
Sports Direct declined to comment on the Blacks announcement, or say whether it would return to the negotiating table with another bid for all or part of the company.
It emerged yesterday morning that Sports Direct was prepared to help Blacks with a joint venture that would share costs on warehouses, the supply chain and technology.