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Fashion and homeware retailer Country Road has confirmed it is in talks with Gresham Private Equity about the possible acquisition of clothing brands Witchery and Mimco.
Country Road, a 200-store Australian subsidiary in which retailer Woolworths has an 87.88% stake, issued a brief statement to the ASX on Friday, in response to media speculation.
"Country Road is aware of media speculation concerning a possible transaction with Gresham Private Equity in relation to the Witchery Group," the company said.
"Discussions with Gresham Private Equity relate to proposals that are incomplete, confidential and non-binding and there is no certainty that a transaction will take place."
Retail Doctor Group managing director Brian Walker says market consolidation in the fashion retail sector is inevitable.
"Large-scale businesses in this sector need to work with acquisition-based strategies," he says.
"There's a great synergy between Country Road and Witchery, and they have complementary markets, so this move makes sense.
"They're both strong brand names with good distribution networks.
"A takeover could well result in increased efficiencies in terms of supply chains, IT and other resources," Walker says.
Gresham Private Equity acquired Witchery from retail billionaire Solomon Lew in August 2006, for around $160 million.
It has been looking for a buyer for the 200-store chain for at least a year, after extensive expansion and the abandonment of a planned initial public offering last year.
The float was expected to launch at around $300 to $350 million.
Country Road shares have remained steady at $3.26 since its ASX announcement.
Both Country Road and Gresham Private Equity declined to comment on the possible takeover when contacted this morning.
This article first appeared at SmartCompany.