Specialty Fashion Group, the owner of Katies and Millers womens' clothing chains, has received a takeover offer from a Middle Eastern investment company.
Specialty Fashion shares soared 26 per cent, or 13.5 cents, to 65.5 cents, their highest level in almost six months.
The company confirmed on Wednesday that it is in talks with an undisclosed investment company from the Middle East, which has offered 70 cents a share in a bid that values the company at about $135 million.
The offer is a premium on the 52 cents a share Specialty Fashion was valued at on Tuesday, before news of the takeover bid broke.
The deal would result in the ASX-listed retailer becoming a private company.
Speciality Fashion says it has granted the bidder access to its books for due diligence but there is no certainty any deal will go ahead as a number of conditions need to be satisfied.
The group's acquisition of troubled clothing chain Rivers in 2013 has been a drag on earnings, however Rivers' losses had halved during the 2016 financial year in a sign its fortunes are turning around.
The company, which also owns clothing brands City Chic, Autograph and Crossroads, has previously said it expected Rivers to begin turning a profit during its 2017 financial year.
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