Revolution Beauty Group PLC (AIM:REVB) shares jumped 10% to 8p as it confirmed that Mike Ashley's Frasers Group PLC (LSE:FRAS) is among those possibly interested in taking it over.
The cosmetics company has issued a statement saying that the House of Frasers and Sports Direct owner is "one of a number of parties conducting due diligence" after it put itself up for sale last month.
"There can be no certainty that Frasers' interest will result in a firm offer for the company," the AIM-listed company stressed.
FTSE 250-listed Frasers made an approach about a potential offer for the embattled make-up company, which has seen its shares tank 59% so far this year and last month revealed it was in talks with its banks over funding.
Sky News reported at the weekend that sources in the industry said Frasers was considering a bid but was not 100% set on it.
A 27% stake in Revolution is owned by fashion e-retailer Boohoo Group PLC (AIM:BOO), in which Frasers owns a 29% stake. Earlier this year, Frasers used its stake to vote against Boohoo's plans to change its name to Debenhams.
"Frasers is no stranger to clashing with Boohoo," said analyst Russ Mould at AJ Bell, with the group having previously tried but failed to get founder Ashley a seat on the board there.
"The stage is set for another battle between the two companies in the quest to own Revolution Beauty."
He added: "Under normal circumstances, one might expect a deep-pocketed business like Frasers to seal the deal with ease. However, Boohoo owns 29% of Revolution Beauty and is unlikely to let its arch-rival swoop on this business without a fight.
"Revolution Beauty has so far proved to be a disastrous investment for Boohoo, having built up a stake at a much higher price than it is trading today.
"Boohoo can either hope to narrow some of its losses by someone like Frasers taking over the target at a chunky premium to the current market price, or it can buy the business outright and enact the mother of all turnaround stories to try and claw back its losses."
** Update: Adds share price, details **