Mamas & Papas considers store closures amid talks with BlueGem

Mamas & Papas, is in talks with Blue Gem, the financiers behind Liberty department store, which wants to acquire a majority stake in return for injecting £20m into the retailer.

But BlueGem is keen to cut the Mamas & Papas 55-strong store estate, according to the Telegraph.

Industry experts believe it could reduce its footprint by up to half. If it were to go ahead it would likely use a Company Voluntary Arrangement, which allows troubled companies to walk away from loss-making properties.

Of the £20m to be put forward by BlueGem, around £12m has been earmarked for the business and the remainder is expected to be used to pay off a shareholder loan to co-founder David Scacchetti.

David and his wife Luisa founded the retailer in 1981 and they have owned it entirely ever since. BlueGem has been given a period of exclusivity to thrash out an agreement with the founders.

Mamas & Papas has been hit by fierce competition from online players and supermarkets. Mamas & Papas, which trades in 59 overseas markets, reported sales of £108m against profits of £5m last year. However, it is believed it has recently suffered a decline in trading.

Sources close to the situation said that BlueGem needs to persuade HSBC, Mamas & Papas’ main lender to give the company some breathing space.