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Minority stake in Reiss expected to stir overseas interest

The sale of a minority stake in premium retailer Reiss is likely to generate “lots of interest” from private equity firms and international investors, industry sources have said.

David Reiss, who founded the business 40 years ago and remains its owner and managing director, has reportedly appointed investment firm Morgan Stanley to review options for growing the business internationally, which could include the sale of a minority stake to outside investors for the first time.

It is thought the deal would value Reiss at as much as £325m and is unlikely to be completed before the end of the year.

The chief executive of another premium womenswear retailer said the business was likely to attract investors from Asia, China and South Africa.

He said: “A lot of Asian investors sit in that middle market and would be interested. Chinese and Korean conglomerates – like Sanpower, which bought House of Fraser – are likely candidates. Reiss is a well looked-after, clean brand that has the numbers behind it, so it would be easier for [foreign retailers] to infiltrate the UK with an already successful brand, rather than trying to crack the market with one of their own labels.

“Japanese clothing group Fast Retailing buying J Brand and South African-based The Foschini Group buying Phase Eight are examples of this happening recently.”

He said the price tag and structure may put off private equity investors: “They would need to sell it on for a lot more, very quickly, to make a return on the investment, which might be difficult if David [Reiss] sticks around.”

However, retail analyst Nick Bubb said a private equity sale was likely, but he did not rule out a trade sale. “Stranger things have happened,” he commented.

Kate Calvert, retail analyst at banking group Investec, said: “Private equity is the more natural starting point for a minority stake, although the exit strategy tends to be key.”

Reiss made £9m in pre-tax profits in 2013. Profits are said to have doubled last year and are expected to exceed £25m this year.

It has 130 stores, 80 of which are in the UK.

Reiss declined to comment.

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