The Australian fashion industry has woken up to a shake-up Monday when ailing Specialty Fashion Group has sold its mid-market fashion brands to direct competitor Noni B for 31 million dollars.

Specialty Fashion’s chair Anne McDonald said that following a review of the business, directors unanimously agreed that retaining City Chic and selling all other businesses would maximise value for shareholders.

As a result, Specialty Fashion Group’s mid-market brands – Millers, Katies, Rivers, Crossroads, and Autograph – are now the property of competing Noni B Group.

“In a challenging and rapidly changing retail environment, [Specialty Fashion] has been successful in building City Chic into a market leader in the attractive plus-size segment of the women’s apparel market,” chairwoman Anne McDonald said Monday.

“The transaction will provide the funding flexibility, corporate structure, and management focus required to realise City Chic’s longer-term full potential”.

It’s worth recalling that at the end of last year, the struggling Australian fashion group announced the closure of 300 stores over three years.

Specialty Fashion offloads mid-range fashion labels after seven months of strategic reviews

The brands being sold ran at a combined 6.2 million dollars loss in the 12 months to the end of December, while City Chic was on track for underlying earnings of 19 million dollars to 20 million dollars this financial year. Specialty Fashion ran at an 8 million dollars loss in 2017.

The deal is the outcome of a seven-month strategic review, during which time Specialty Fashion considered selling its entire business, selling individual brands or raising capital to shore up its balance sheet.

Minority shareholders Lazard and Sandon Capital had called on the company to raise capital rather than sell assets at such a discount.

"The board considers that a significant turnaround is required to reset the other businesses in the portfolio and that this would require time, capital and carry material execution risk," the company’s chairwoman highlighted.

On the wake of the news Specialty Fashion’s shares surged 46 percent on Monday.

Image:Millers, Specialty Fashion Group Corporate Website