Private equity firms target retailer Phase Eight

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Several private equity firms are understood to have held talks over a potential acquisition of Phase Eight, the womenswear chain.

Lloyds Development Capital (LDC), Inflexion and Change Capital are among the private equity firms who have expressed an interest in buying the retailer, which has 82 stores and 125 concessions.

Phase Eight received a series of unsolicited bids last month and some of the interested parties are thought to be keen to retain the services of the management team, led by chairman Michael Rahimim. Phase Eight, LDC, Inflexion and Change Capital declined to comment.

Anecdotally, Phase Eight has traded robustly over recent months and the department stores John Lewis and Debenhams are understood to have increased the amount of space allocated to the brand.

But Phase Eight’s biggest shareholder, Kaupthing Capital Partners (KCP), is thought to be taking a cautious approach to examining potential investors and there is no guarantee that a sale will be completed.

KCP, a buyout unit of the troubled Icelandic bank Kaupthing, owns a 49 per cent shareholding in Phase Eight. But the shareholding has, in effect, been under the control of the accountancy firm Smith & Williamson since it was appointed administrator to KCP in October 2008.

For the year to 31 January 2009, Phase Eight posted a 42 per cent uplift in pre-tax profits to £4.44m, compared with £3.12m the year before, according to the latest accounts filed at Companies House. The retailer, which targets women aged 35 to 55 years old, increased its operating profit to £4.72m, on total sales up by 11 per cent to £59.2m over the 12-month period.

In January 2007, Phase Eight was acquired for £51.5m by a consortium that included senior executives from Jane Norman, the young women’s fashion chain.