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Phase Eight in management buy-out

Phase Eight, the womenswear retail chain, is set to be taken over by its management in a deal backed by Russian investors, ending its links with the private equity arm of Icelandic bank Kaupthing.

Phase Eight chairman Michael Rahamim is leading the management buy-out of the chain. Rahamim has been an investor since 2007 when Kaupthing Capital Partners bought the business for £51.5m from Barclays Private Equity.

Kew Capital, a business formed in 2008 by two former Credit Suisse executives to invest on behalf of Russian steel billionaires Alexander Abramov and Alexander Frolov, has snapped up a minority stake in the business. There is no majority investor, according to the Sunday Telegraph.

Phase Eight has 80 stores and 127 concessions in department stores such as John Lewis and Debenhams. Phase Eight is thought to be expanding in to Scandinavia, Switzerland and Asia, where it is adding a buying office in China.   

The company made sales of £59.2m and a profit of £4.4m in the year to January 2009. Earnings are reportedly higher in the year to January 2010, with trading in department stores anecdotally strong.

Kaupthing Capital Partners bought a 49% stake in Phase Eight from Barclays Private Equity which backed another management buy-out in 2005 for £27m. Other investors included Jane Norman chief executive Saj Shah and Jane Norman deputy chief executive and finance director Ian Findlay as well as Rahamim.

Nationalised bank Kaupthing remains Phase Eight’s senior debtholder.

Abramov and Frolov are founding shareholders of Evraz Group, Russia largest steel producer.

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