China's Shantex Fashions Bid For Phase Eight

A Chinese textiles group is fashioning a takeover bid for Phase Eight, the high street clothing chain.

Sky News has learnt that Shantex, a manufacturer and exporter of textile accessories, is among a pack of potential bidders for Phase Eight, which has been put up for sale by its private equity backers.

Talks between Towerbrook, which bought the fashion retailer in 2011, and prospective buyers are at an early stage, and are unlikely to result in a transaction until much later this year.

Sources indicated on Tuesday that a number of other private equity firms were also examining bids for the business, which is reported to be valued by its current owners at approximately £300m.

If Shantex decides to proceed with a formal offer for Phase Eight, it would represent its first acquisition of a major overseas retail business, reflecting an increasing trend for Chinese companies to pursue offshore takeovers.

Phase Eight trades from about 400 shops, including roughly 100 outside the UK in countries such as Singapore and Sweden.

According to the company's latest set of annual results, filed at Companies House last year, Phase Eight made an operating profit of £18.6m in the year to 1 February 2014, up from £17.1m the previous year.

In the notes to the accounts, the directors said the company's performance had been promising, adding: "The customer reaction in our international markets continues to be very positive, enabling the group to accelerate its expansion plans and seek new partnerships further afield.

"Phase Eight's greatest strength is its loyal customer following and distinct brand identity."

News of the possible Chinese interest in Phase Eight comes as the high street digests news of a Christmas trading period characterised by further growth in online sales.

Marks & Spencer (Other OTC: MAKSF - news) has been the biggest loser so far, with its sales decline attributed to ongoing logistics problems, while Next (Other OTC: NXGPF - news) had another successful festive period.

Shantex could not be reached for comment, while Rothschild, which is handling the auction for Towerbrook, declined to comment.