Oceana has a 36.25 per cent stake in Etam, largely acquired from tender and takeover offers. Etam's shares slipped 8p to 244p yesterday as hopes of another bid faded.
Stanley Lewis and his son control Foschini, a South African retailer with about 800 stores. In the past Etam has rejected the Lewises' offer to share Foschini's retail expertise, such as its knowledge of electronic systems.
Keith Miles, Etam's finance director, said that after a number of informal discussions 'there was a realisation that it was in the interests of both sides to concentrate on the bottom line of the company, and therefore we had more to gain from being friends'.
Mr Miles rejected the suggestion that, having secured board representation, Oceana had won the battle. Michael Lewis also dismissed this idea, saying: 'It's a solution that suits both of us. It will be immensely constructive.'
Michael Lewis, 34, became an Etam director yesterday. The appointment of his father, who is 70, will await Etam's annual meeting in June.
Michael Lewis said Oceana intended to use its right to increase its holding in Etam by 1 per cent a year, market conditions permitting. It cannot buy more than this without mounting a full takeover.
Mr Lewis said he and his father would not be so presumptuous as to insist on an immediate change in the way Etam is run. 'We see many things similarly. We have gained a mutual respect for each other's abilities.'
Etam's management is well regarded by City investors. But the company has still to return to the profits of nearly pounds 18m that it made in the year to 31 January 1988, since when its sales have doubled.