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JD Sports expected to exit Debenhams rescue talks after Arcadia collapse

<span>Photograph: Danny Lawson/PA</span>
Photograph: Danny Lawson/PA

JD Sports is set to pull out of talks over a rescue deal for Debenhams on Tuesday, putting thousands of jobs at risk at the struggling department store group.

Last-ditch negotiations to secure a deal were continuing but the news on Monday night that Debenhams’ major supplier Arcadia had collapsed into administration, as well as uncertainty about conditions on the high street and negative reaction from shareholders, are thought to have cooled JD’s interest.

A near 6% rise in JD’s share price on Monday amid speculation that it might be backing away from Debenhams was one major influence on the group’s management team led by Peter Cowgill, the executive chairman. The rebound came after millions of pounds were wiped off the company’s value last week when it emerged it was considering buying Debenhams.

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Debenhams, which employs about 12,000 people, has been considering a potential sale since the summer after it went into administration in April for the second time in a year.

JD is thought to have been mainly interested in the Debenhams website but analysts said it was hoped it could take on almost half the group’s 124 outlets. The group saw a chance to move into a broader market and sell homewares, beauty products and smarter clothing to its existing customers.

If JD does pull out of rescue talks, the only remaining suitor likely to take on a significant number of stores is Mike Ashley’s Frasers Group.

Ashley has made no secret of his interest in the ailing department store despite seeing a £150m stake he built up in the then-listed company wiped out last year in a debt restructuring deal with the department store’s lenders.

Frasers could save costs for the department store group by merging it with its House of Fraser chain. However, Ashley’s offers for the business have so far not exceeded half of the £300m hoped for by its owners.

Other potentially interested parties, including the online specialist The Hut Group, which is understood to have been interested in just the website, and India’s Reliance Retail, appear to have melted away.

Other retailers may be interested in Debenhams brands including Maine and Mantaray, or some of its prime sites. Restructuring firm Hilco has been lined up to sell off stock and other assets if no buyer can be found.

Debenhams’ current owners are not expected to hold on to the group. Debenhams and JD Sports declined to comment.