Shares in Debenhams rose by 10.9 per cent this morning after Milestone Resources, an investment group headed by the Dubai-based retailer Micky Jagtiani, bought a 7.3 per cent stake in the UK group, fuelling takeover speculation.

Stock in the department store chain increased by 8.25p in early trading to 83.75p, giving the struggling retailer, in which shares have almost halved since rejoining the London Stock Exchange in 2005, a market value of £719.3 million.

Milestone has bought the stake in Debenhams ahead of next week's deadline when Baugur, the Icelandic investment group that holds a 13.5 per cent stake in Debenhams, could make an offer for the retailer.

In July, Baugur, owner of the rival House of Fraser, ruled itself out of making a bid for Debenhams and under Takeover Panel guidelines was stopped from making an offer for six months.

Mr Jagtiani has also been linked to UK retail takeovers, such as New Look, and to a bid for Debenhams before it was taken private.

His Landmark business has expanded rapidly in recent years, mostly in emerging markets.

Debenhams recently reported like-for-like sales down 5 per cent in the year to September 30, and concern is growing over Christmas trading.

Debenhams was not immediately available for comment.

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