House of Fraser could float on the stock market as soon as July, if exclusive talks with French department store Galeries Lafayette collapse.
Owners of the British retailer have been looking to offload the business for more than a year but have failed to find a buyer because of huge debts and a large pension deficit.
However, chairman Don McCarthy, is understood to have secured exclusive talks with the French department store rival, which will expire by the end of January.
House of Fraser has also appointed Rothschild in the past few weeks to manage an IPO to see whether there is any interest from institutional investors in a dual track process in the hope of increasing the price tag.
It is understood McCarthy wants at least £450 million and a handful of Middle Eastern investors are thought to be looking at the business should talks with Galeries Lafayette collapse.
Independent retail analyst Nick Bubb said Galeries Lafayette seemed like a natural fit to buy the company as it had made clear it wants a presence in London.
He added: “The chairman is a skilled negotiator and it is hard to tell whether the news that Galeries Lafayette is in exclusive talks with House of Fraser is a masterstroke or a desperate last throw of the dice, after all other solutions to the distressed balance sheet and shareholder base have failed.”
House of Fraser had struggled previously to keep up with rival John Lewis, with underinvestment particularly in its online business. However, a major revamp of its Oxford Street flagship and its website saw sales up 0.8% in the three months to the end of October, and a 31 per cent boost in internet sales.
Billionaire Sports Direct and Newcastle United owner Mike Ashley looked at buying a minority stake in House of Fraser last year but is thought to have been put off by the £400 million pension deficit, the refinancing required on its current debt and strict pre-emption rights held by the current owners over any possible sale.
House of Fraser and Galeries Lafayette declined to comment.