Discount clothing retailer Peacock Group is poised to become the first British company to be taken over by a consortium backed by hedge funds after agreeing a management buyout deal worth £404.4 million.

Management led by Richard Kirk, the chief executive of Peacocks, have formed a new company, Henson No 1, as a special vehicle for taking the company private, after making an initial approach earlier last month.

In an audacious move, being co-ordinated by Wall Street banking adviser Goldman Sachs, Mr Kirk, joined by Keith Bryant and Neil Burns, are offering shareholders 340.5p a share for the company.

If the deal is approved, existing management will end up owning 43.3 per cent of the retailer - which until now has been highly secretive about the terms of the mooted offer.

But supporting management's efforts are two American hedge funds - Och-Ziff and Perry Capital - in what is believed to be the first time that this kind of financial markets player has driven a takeover of a British company.

As well as Och-Ziff, which was instrumental in Malcolm Glazer's takeover of Manchester United, and Perry Capital, funding is also being provided by Echelon, the investment vehicle of former Peacock chairman John Lovering.

Another hedge fund, Citadel, was previously reported to be involved in the consortium preparing the bid, but played no part in today's stock market announcement.

The 340.5p a share offer by management represents a premium of 29.2 per cent to the 263.5p closing price on August 15. This was the day before Goldman officially made its approach to Peacock on behalf of the executives.

Because of the potential conflicts of interest involved, the executives brought in a team of independent directors to oversee the talks. They, in turn, were advised by Investec.

Gavin Simonds, the chairman of Peacock, said: "We believe that the proposals represent fair value for the business and its prospects and, having undergone the process of assessing other potential alternative acquirers of Peacock and after careful consideration, the independent directors are unanimous in recommending shareholderls vote in favour of the proposals."

The £404.4 million for the takeover will be funded through a combination of both debt and equity.

The executives will subscribe for £23.3 million of the shares, alongside £9.2 million of equity funding from Echelon and £168.3 million from the two hedge funds.

The balance will be raised in the debt markets via Goldman Sachs, which is also extending a revolving credit facility worth a further £110 million.

Peacocks, which also operates Bonmarche and Fragrance Shop stores, made pre-tax profits of £25 million for the financial year to the end of March - on turnover of £548.2 million.

Earlier this month it reported that sales were performing strongly this year - with underlying sales for the 13 weeks to the beginning of October up 6.1 per cent.

Shares in Peacocks gained 2.3 per cent this morning, rising 7.5p to 334.25p.

For detailed data on Peacock shares click here

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