TED Baker has seen its shares drop by more than a fifth after the frontrunner to take over the fashion chain pulled out of the process.

Ted Baker said the preferred bidder told the group on Monday that it would not be going ahead with an offer.

The retailer said this was not linked to the bidder’s review of its books under due diligence.

Ted Baker said it will now consider pressing ahead with other offers it has recently received as it seeks to get the sale process back on track.

However, its shares slumped by as much as 23 per cent at one stage as the sale looked to be in doubt, coming just two weeks after private equity suitor Sycamore also bowed out.

One analyst said buyers would be seeking a "knock-out price to compensate for the extra risks involved".

Another, Victoria Scholar, head of investment at interactive investors, pointed to the earlier stall.

She said: “Ted Baker already had a difficult time with another potential acquirer after US private equity firm Sycamore Partners issued three takeover proposals but eventually walked away, leading to a plunge in its share price.

“With record low UK consumer confidence, the cost of living crisis, the possibility of a recession and shaky equity markets, it is understandable that Ted Baker is desperate for a buyer and explains why investors are shunning the stock this morning.”

Ted Baker, which has nearly 400 locations, launched a formal sale process in April after Sycamore had made a series of approaches for the brand and following interest from a number of other interested buyers.

Its shares jumped more than 14% when it launched the sale process after rejecting the series of indicative takeover offers.

READ MORE: Ted Baker shares jump as retailer puts itself up for sale

The fashion retailer made the move after receiving a third “unsolicited” approach to sell.

Sycamore’s earlier approaches were rejected after they “significantly undervalued” Ted Baker, the company board said.

The third approach by Sycamore valued the retailer at around £254 million.

It represents a significant fall from the company’s peak, when it was valued at round £1.5 billion.

Ted Baker was among luxury retailers hammered by the pandemic, but it had also gone into Covid in a weak spot following years of decline and is in the middle of a plan to revamp the business.

Ray Kelvin, who founded the business as a shirt specialist in Glasgow in 1988, stepped away from his position as chief executive but is still a shareholder.

The retailer recently revealed that it remained in the red in 2021 and 2022, but reduced its losses after the greater easing of social restrictions.

It reported a pre-tax loss of £44.1m for the year to January 29, compared with a £107.7m loss in the previous year. It said this was driven by 20.5% increase in revenues to £428.2m as it benefited from the easing of the pandemic restrictions in some other countries and a hike in online sales.

The group added that this positivity continued into the quarter to April, with total sales up 20% against levels from the same period last year.

Rachel Osborne, Ted Baker chief executive, said then that “while we remain mindful of what is a challenging macro environment, we are well positioned for growth”.

Russ Mould, AJ Bell investment director, said that “it’s not surprising that the sale process isn’t going smoothly”.

Mr Mould added: “Anyone buying a troubled business will want a knock-out price to compensate for the extra risks involved, so perhaps conversations haven’t been going well in terms of a price that both the suitor and target can agree on.”

Shares in Ted Baker closed down 18.42%, or 25.2p, at 111.6p.