Shares in Debenhams nosedived yesterday after Merrill Lynch Private Equity sold its remaining stake in the department store group.

The value of Merrill’s 6.2 per cent stake suffered a slump in value and was sold at 60p a share. The flotation price was 195p when Debenhams relisted in May 2006.

The stake was sold for£28.4 million, compared with the£103 million it was valued at at the time of the float. Shares in Debenhams fell 17 per cent to 59.25p following the news.

Merrill was one of the three firms behind the buy-out of Debenhams. Fellow investors TPG Capital and CVC Capital, which have a 14 and 9.7 per cent holding in Debenhams respectively, were not forewarned about its exit. According to reports, neither TPG nor CVC plan to sell their stakes.

It is thought that Merrill made a profit of£350 million to£400 million on its overall investment in Debenhams.