Former Poundland Owner Joins Race For Reiss

An investment firm which counts Poundland among its investments is targeting a more upmarket high street presence with a bid to acquire a stake in the fashion retailer Reiss.

Sky News understands that Warburg Pincus, which also owns a big stake in Premier Foods (Other OTC: PRRFY - news) , the maker of Mr Kipling cakes, is one of three final bidders for a large shareholding in Reiss.

Warburg Pincus is vying with Permira, the private equity group which owns Dr Martens, and another private equity group about buying a stake in the chain from David Reiss, its founder and controlling shareholder.

A decision about a preferred bidder is expected to be made as soon as this month, with a deal expected to be signed later this year.

Reiss is one of the most prominent fashion brands on UK high streets not to have taken money from external investors, and the news that its founder is open to the sale of a minority stake has drawn attention from a wide number of potential backers.

Warburg Pincus continues to own more than 15% of Poundland, the discount retailer, after taking it public a couple of years ago.

Sky News revealed last year that Mr Reiss had appointed Morgan Stanley (Xetra: 885836 - news) , the Wall Street investment bank, to conduct a review of his options for the business.

Reiss has exploited its popularity with celebrity customers for many years, seeing a surge in sales after one of its dresses was worn by the Duchess of Cambridge shortly before her marriage to Prince William in 2011.

Other well-known names to declare their enthusiasm for Reiss' products include the models Kelly Brook and David Gandy.

People close to the company have suggested that a deal could value Reiss at as much as £325m, although a more precise figure based on current trading performance is not available.

A valuation above £300m would be hefty for a company which made £9m in pre-tax profit in 2013, although profits are said to have doubled last year and are expected to exceed £25m this year, an insider said.

Mr Reiss is said to be keen to find an investor which can help to facilitate its continued international growth.

The company, whose direct competitors include the likes of Ted Baker (Other OTC: TBAKF - news) and French Connection (LSE: FCCN.L - news) , trades from approximately 130 stores, 80 of which are in the UK.

Founded in 1971, Reiss has 20 outlets in the US and several in countries such as Hong Kong and Russia.

It has also opened a flagship shop in Toronto, Canada and has 20 franchise stores in the Middle East.

Reiss, whose revenues are divided broadly equally between menswear and womenswear, sells clothes at higher prices than mid-market retailers but cheaper than designer fashion labels.

The chain's founder, who rarely gives interviews, has expressed scepticism about the prospects of rivals who have sold controlling stakes, and people close to his company say that he intends to retain a majority interest in the business.

"Owner-drivers have a vision but when you hand the reins down to other people, that drive and vision goes to other people. You have to have someone at the top who has energy, drive and spirit to make things happen," Mr Reiss told The Telegraph in 2006.

Reiss' board members include Alan Jacobs, a corporate financier who has orchestrated the sale of a string of well-known retailers.

Warburg Pincus and Reiss declined to comment.