Coats Viyella set to demerge

Coats Viyella, Britain's biggest textile group, is to announce this week that it is splitting itself into two. At a pre-Christmas trading statement, Sir David Alliance, Coats' chairman, will announce that his struggling company is demerging its clothing and textiles division, which includes the Jaegar fashion brand, Dorma home furnishings and the contract clothing business supplying Marks & Spencer, from its engineering and threads business.

Analysts believe a split could create more than pounds 300m in value for shareholders. Shares in Coats, which currently valued at pounds 714m, are near a 10-year low, as the company has struggled in competitive markets.

Those close to the company agree with estimates that Coats' clothing and textiles side could be valued at around pounds 650m as a separate company while Dynacast, which makes plastic and metal precision components, could be worth some pounds 400m.

It is thought that Michael Ost, Coat's chief executive, will run the engineering company.