Furnishings chain MFI was yesterday at the centre of speculation relating to a possible merger with the owner of rival kitchens brand Moben.

Merchant Equity Partners, which bought MFI for a nominal £1 in 2006, is said to be exploring potential combinations for the business, as well as the possibility of attracting further investment.

The Sunday Times said MFI was looking at a merger with its UK rival Homeform, which owns brands Moben, Kitchens Direct, Sharps and Dolphin. Manchester-based Homeform has 160 showrooms across the UK with more than 1300 employees and 1500 self-employed fitters and designers.

Talks are also said to have taken place with Nobia, the Swedish retailer, about combining its UK business Magnet Kitchens with MFI. Discussions have also been held with several private equity firms and hedge funds about an additional injection of cash.

A spokesman for Merchant told the newspaper that it had been happy with operational progress since the 2006 deal, but that recent market conditions had prompted it to consider its strategic options and "possible business combinations".

MFI - one of the UK's best known retail brands - has been the subject of frequent speculation about its future. However, sources told the newspaper that the retailer will survive and that its original backers will continue to provide support.

A tie-up with Homeform, which is owned by private equity firm Sun European, would create a combined company with around 360 stores and employing more than 5000 staff.