Limited Brands Inc is to sell its Lerner New York chain, also known as New York & Company, to an investor group led by the unit's president and chief executive, Richard Crystal, and Bear Stearns Merchant Banking, the private equity arm of Bear Stearns & Co.

Under the agreement announced Friday, Limited Brands will receive $78.5 million in cash, a $75 million subordinated note and warrants for 15 per cent of the new company's common equity.

The sale frees Limited Brands to focus on brands including Victoria's Secret, Express and Bath & Body Works. Leslie H Wexner, chairman and chief executive officer of Limited Brands, described the announcement as "a continuation of our strategy to sharpen Limited Brands' focus and create shareholder value."

Limited acquired Lerner in 1985. Positioned as its lower priced apparel chain, last year its 522 stores achieved $940 million in sales.

Richard Crystal said in a statement: "I am very excited about the opportunity that this new financial commitment has given us to build New York & Company into the leading brand for women's value priced fashion apparel. This is great news for our brand, our customers and our associates."

The sale of New York & Co is the latest in a list of streamlining moves made by Limited since 1995. It has created two publicly traded companies: Abercrombie & Fitch and Too Inc; sold Lane Bryant to Charming Shoppes; sold majority interests in Alliance Data Systems and Galyan's Trading Company; repurchased more than 300 million shares; and closed more than 1000 under-performing stores.

Last week Limited Brands reported an 83 per cent drop in its third quarter earnings.