Sky News has learnt that Elliott, which owns the books retailers Foyle's and Waterstones, is one of the parties that has expressed an interest in buying Reiss from Next and Warburg Pincus, its current shareholders.

It was unclear on Wednesday whether Elliott would table a formal bid for the clothing retailer, which was founded in 1971 by David Reiss.

At least three parties are said to be involved in the auction, which is being overseen by bankers at Raymond James.

One factor leaning in Elliott's favour is that Paul Best, one of its senior London-based executives, was instrumental in Warburg Pincus's acquisition of a stake in the chain in 2016.

"The business has built an enviable position in its core UK market, with a broad and loyal customer base, and we believe there is a significant opportunity to build on this success and accelerate development internationally," Mr Best said seven years ago.

Through its ownership of Bantry Bay, a specialist lender with exposure to Superdry and ASOS, Elliott has a significant understanding of the UK retail sector.

Sources insist that it remains possible that Next and Warburg Pincus will decide not to sell Reiss.

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Based on expected earnings before interest, tax, depreciation and amortisation in the current financial year of almost £65m, Reiss could be valued at in excess of £500m.

One person close to Next has cast doubt on whether it would ultimately sell its 51% stake, with a retail executive suggesting that it may instead seek to acquire Warburg Pincus's minority interest.

If it did decide to offload its shareholding, it would be a significant move for Next, run by chief executive Lord Wolfson.

Under his long stewardship, Next has delivered impressive returns for shareholders and transformed itself into Britain's clothing retailer.

In recent years, it has diversified by acquiring a string of distressed retail brands, often vying with the billionaire tycoon Mike Ashley to snap up ailing retailers.

It has struck joint ventures with companies including Victoria's Secret and Gap UK, while buying outright the baby products retailer JoJo Maman Bebe alongside hedge fund Davidson Kempner, and the fashion chain Joules.

The strength of its balance sheet has enabled it to wield significant muscle in negotiations with landlords during a period when traditional rivals such as Arcadia Group and Debenhams have crashed into insolvency.

It bought an initial 25% stake in Reiss in 2021, making a £33m equity investment to buy shares from Warburg Pincus.

Last summer, it exercised an option to take majority ownership of the chain by snapping up a further 26% shareholding.

Lord Wolfson described Reiss at the time of the original deal as "an outstanding brand with enormous potential".

Reiss's online operations have now migrated to Next's Total Platform, a technology service set up to handle smaller retailers' e-commerce logistics and sales.

The affordable luxury fashion chain trades from more than 60 UK shops, and has plans to expand its US estate of 7 stores threefold in the coming years.

As well as its own outlets, its men's and women's fashion products are also sold at Selfridges in the UK and Bloomingdale's in the US.

Elliott and Next, declined to comment.