Lion talks stall as Ashley takes lead in Agent Provocateur race

The battle for control of the struggling Agent Provocateur lingerie brand has taken a fresh twist amid a breakdown in talks between the company's lender and the leading bidder.

Sky News understands that discussions between Lion Capital, which is working with Bendon Group - the manufacturer of Heidi Klum Intimates and Stella McCartney Lingerie - and Barclays (LSE: BARC.L - news) stalled over the weekend.

The development paves the way for Sports Direct International (Other OTC: SDIPF - news) , the high street chain controlled by Mike Ashley, to clinch a takeover of Agent Provocateur within the next 48 hours.

People close to the process, which is being run by AlixPartners on behalf of Barclays and 3i, Agent Provocateur's current owner, insisted on Monday that it remained a two-horse race, adding that the outcome remained unclear.

Sports Direct's interest in a takeover of Agent Provocateur was disclosed by Sky News earlier this month.

Staff at the upmarket underwear brand will be keen for a rapid resolution to the uncertainty surrounding its future.

Sources say that while staff will be paid as usual this week, Agent Provocateur's financial position would become more precarious without a new investor after February's payroll is processed.

Any takeover is expected to be implemented through an insolvency process known as a pre-pack administration to be overseen by AlixPartners.

Agent Provocateur is expected to be sold for significantly less than the £30m sum it owes to Barclays.

The Times reported on Saturday (Shenzhen: 002291.SZ - news) that Mr Ashley had offered £27.5m for the business.

A deal on those terms would leave 3i, which has owned the brand for about a decade, out of the money.

Agent Provocateur's chairman, Chris Woodhouse, stepped down from the role shortly before Christmas, while Fabrizio Malverdi, the brand's chief executive, is seen as unlikely to remain with the business after a takeover.

Other key figures - including the former chief executive Garry Hogarth - have also left in the wake of a review last year, led by Goldman Sachs (NYSE: GS-PB - news) , which examined and then decided against a sale.

3i said last year that Agent Provocateur had been "impacted by declining luxury spend in a number of its key markets", the effect of which had been exacerbated by "the inconsistent execution of its recent store expansion programme and the discovery of accounting issues".‎

Mr Malverdi, a luxury goods executive whose previous employers included LVMH, was parachuted in last year, with a restructuring plan supported by an additional £4m investment by 3i.

These "challenges", 3i said, had prompted the value of its stake in Agent Provocateur to be reduced by £39m.

Sales in the year to 28 March 2015, the last for which accounts are available, rose 16% to £61.7m, but pre-tax profits fell by more than a quarter to £4.6m.

3i declined to comment, while AlixPartners could not be reached.