Bankrupt off-price retailer Factory 2-U Stores Inc has agreed to sell its assets for $28 million.

The buyer is a new company called Factory 2-U Acquisition LLC, formed by an affiliate of National Stores Inc, The Alamo Group, Garcel Inc (operating as The Great American Group) and The Ozer Group LLC.

Under terms of the agreement, the Factory 2-U Acquisition will acquire assets, inventory and lease obligations for the company's stores and distribution centre.

Completion of the transaction is subject to Bankruptcy Court approval.

An auction to attract higher or better bids for Factory 2-U's assets is also being held in Wilmington, Delaware on 31 August 2004. A follow-up hearing has been scheduled for 2 September.

Norman G Plotkin, chief executive officer of Factory 2-U, said: "We believe this process, which allows for higher or better bids for our company to be submitted by other interested parties at an auction, will generate the best available outcome for the company and its constituents."