Merchant Equity Partners, a new private equity firm focused on retail buyouts, is understood to be in "advanced stages" of appraising an offer for MFI Furniture, the London-listed furniture retailer. Rothschild is advising MEP.

Two sources familiar with the situation confirmed MEP's interest in the retail arm of the loss-making company - the majority of the business. Spokesmen for MEP, Rothschild and MFI all declined to comment.