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Duke Street Plots Original Factory Shop Sale

(c) Sky News 2013

The Original Factory Shop, one of Britain's largest discount retailers, is being groomed for a sale as the beleaguered sector braces for another year of prominent high street bankruptcies.

I have learned that Duke Street Capital, the private equity firm which has owned The Original Factory Shop for nearly six years, has begun sounding out prospective City advisers about a sale process that could value the chain at more than £100m.

People close to Duke Street said that it had no plans to sell the retailer this year but confirmed that the buyout firm was in talks to appoint an adviser to oversee an auction of the chain, which sells brands such as Adidas (Other OTC: ADDDF - news) , Philips (Amsterdam: PHIA.AS - news) and Tefal at discounted prices.

The Original Factory Shop, which was established in 1969, operates from more than 180 outlets, according to its website.

It last changed hands in 2007, when Duke Street acquired the company for £68.5m from the private equity arm of Barclays (LSE: BARC.L - news) .

The company is now run by Angela Spindler, a former managing director of Debenhams (Other OTC: DBHSY - news) , who has broadened the chain's product mix. The Original Factory Shop sells clothing, footwear, cosmetics and fragrance, fashion accessories, electrical goods, housewares, home furnishings and toys.

Duke Street declined to comment.

News (NasdaqGS: NWS - news) of the planned sale process comes just days after two larger retailers Jessops and HMV, called in administrators having failed to transform their businesses in the face of tough competition from internet rivals.

Deloitte, the accountancy firm which handled the administration of Woolworths, will spend the next few weeks seeking a buyer for HMV. Distressed retail specialists such as Endless and Hilco will examine bids, as well as mainstream private equity investors such as Oakley Capital, which owns the listings magazine Time Out.

HMV's collapse into administration means that its estimated £60m pension deficit will now be transferred to the custody of the Pension Protection Fund.

HMV is unlikely to be the last casualty of a poor trading environment on the high street. Begbies Traynor, the professional services firm, said yesterday that 140 retailers were on its "critical watchlist".

The demise of HMV is also expected to mean that shop vacancies on British high streets soar to a level not seen for many years.