Mosaic Fashions, the group of UK clothing retailers assembled by Baugur, is to float a stake on the Icelandic Stock Exchange.

Mosaic Fashions, in which Baugur has a 42 per cent stake, operates 600 stores including the Oasis, Karen Millen, Coast and Whistles chains. It hopes to raise £40m through the listing.

Other shareholders include Icelandic bank Kaupthing, which has an 11 per cent stake, and the management led by chief executive Derek Lovelock, with 19 per cent. None of the current investors will be selling any of their stake.

By listing a minority stake in Iceland, Mosaic Fashions will be the first non-Icelandic business to be listed on the Iceland Stock Exchange, the only retail company and will also be one of the largest and most profitable companies.

Lovelock said: "The listing is a further step in our strategy of becoming a leading international fashion retailer through development of our market leading brands. The rationale behind the listing of the company is to raise capital for further growth and to develop international activities, as we will have a stronger balance sheet going forward.

The company said international expansion is a key element of Mosaic's strategy. In Iceland, Mosaic operates three Oasis and Karen Millen stores and made a successful move into the Scandinavian market. Karen Millen has three sites in the US and hopes to open in New York later this year. The additional funds will enable the group to consider more international openings. Mosaic Fashions has seen average organic sales growth of 13 per cent over the last three years. In 2004/05 the company had a turnover of £355.6m.