THE owner of Hamleys has entered into discussions to acquire a stake in troubled department store House of Fraser, it has been revealed.

C Banner International Holdings, which bought Hamleys in 2015, has signed a memorandum of understanding (MoU) with Nanjing Xinjiekou department store, a company affiliated with House of Fraser’s owner Sanpower.

The Chinese firms signed the pact in Hong Kong yesterday, which was followed by an official announcement later in the day.

The agreement signifies that C Banner and Nanjing have entered into talks about a sale of a stake in House of Fraser, although discussions are still at an early stage.

Shanghai-listed Nanjing owns an 89 per cent stake in House of Fraser, and is a subsidiary of Sanpower, a Chinese conglomerate chaired by billionaire Yuan Yafei.

Nanjing is also in discussions with tourism company Wuji Wenhua over selling a 51 per cent stake in the British department store.

The talks with Wuji Wenhua were first announced in March, but Sanpower did not rule out selling a part of its House of Fraser holdings to a third party.

The potential sale of a stake in House of Fraser has raised questions about Yafei’s commitment to the troubled retailer.

However, Mr Yafei has said he is committed to House of Fraser as it puts together a turnaround strategy.

It is unclear at this stage how a combination of two of the best known names in British retail would play out, but the move comes at a delicate time for House of Fraser.

The British department store, which has four sites in Scotland, has now enlisted advisers at KPMG to look at a possible restructuring that could involve store closures.

KPMG is exploring a number of options for House of Fraser, including a Company Voluntary Agreement (CVA), a type of insolvency procedure that would allow the retailer to close stores and cut rents on other outlets.