Furniture business MFI has officially confirmed it is considering an offer for its troubled retail arm.
The company - which has around 200 outlets including 18 in the West Midlands - said the terms being discussed with private equity bidder Merchant Equity Partners involved a nominal sum as well as future cash contributions from MFI.
The proposed deal structure reflects the importance of the retail arm to the company's manufacturing unit and its more successful Howden Joinery business.
The retail business, which has suffered in the past from supply chain problems, made o perating losses of £85.1 million in its last financial year - 171 per cent down on the year before.
MFI began the auction of the division in May after revealing it had received a number of approaches for the struggling business.
Yesterday's statement confirmed speculation that talks were taking place with MEP, which was founded by veteran investment banker Henry Jackson to invest in under-performing retailers.
MFI said: "A number of significant issues remain outstanding, and the discussions may or may not lead to a transaction which the board would compare with other options for MFI Retail.
"The terms currently under discussion include nominal consideration and cash contributions from MFI and the purchaser, as well as other features which could have a material bearing on shareholder value."
It is believed MFI will hand over the chain on a debt-free basis and also absorb existing pensions liabilities, while helping to fund a joint financing package to keep the business afloat.
MEP is also thought to have lined up a management team for the chain that will be led by Gary Favell, the former chief executive of Wyevale Garden Centres.
It is expected that the chain, which once had an estimated value of £1 billion, will change hands for a nominal £1.
The disposal could be announced early next week, following a meeting of the MFI board at the weekend.
MFI has also taken it own initiatives to revive the arm. It has cut the kitchen product range from 60 styles to 40 to improve delivery times.