Coats Viyella's contract clothing division has been sold to a management buy-out team.

The value of the buy-out, which was completed yesterday (December 5) has been put at £12m in cash. Some £17m of assets will be retained by Coats Viyella for disposal.

The buy-out team was led by Mike Shotton, managing director of the underwear business, and Richard Tonge, managing director of the hosiery business. The new company, which is expected to be based in the East Midlands, has initially taken an off-the-shelf name - Marplace - but it is expected that a new name will be announced in due course.

The deal follows weeks of speculation over the future of the business since September when Coats Viyella announced its decision to dispose of its contract clothing interests. The division supplies almost exclusively to Marks & Spencer. The

decision to offload the business followed a 31 per cent drop in pre-tax profits for the first half of the year.

At the same time, the company announced that it was to close four factories - at Ollerton and Worksop in Nottinghamshire, Shepshed in Leicestershire, and Scunthorpe in Lincolnshire. The company was also planning to cut jobs at other factories. An announcement on those is awaited from the MBO team.

Some 4,000 people are employed in the remaining factories - eight in this country and six overseas, in Morocco, Mauritius, Sri Lanka and Cambodia.

It was originally thought that the division would be split up and sold in parts, and that some factories would fail to attract buyers. The buy-out ensures that  the contract clothing business will continue as a single unit.

Max Playfer, Coats Viyella's personnel director, said it was good news that the business had been secured as a complete entity. He said the buy-out team would now be sitting down to work out the future of the business.

"They will be talking to their major customer and seeing what the order position is likely to be. Following that they will be able to make a decision on what restructuring may be necessary and whether further redundancies will be needed."

There may be some bad news to come yet for the remainder of the workforce, but at the moment, they have renewed hope.

Sir Harry Djanogly, chairman of Coats Viyella, said: "I am delighted that we have been able, in difficult circumstances, to reach a deal with the management group which creates a viable future for the clothing businesses."

 By Clive Hinchliffe