Conran Holdings is to take a 25% stake in struggling rival Bank Restaurant Group in what could be a prelude to a full-scale takeover.
The deal is part of a move by Bank to raise £500,000 net of expenses through an issue of new subscription shares in order to keep the company afloat.
Conran will invest some £360,000, while the other new shares are taken up by Bank's largest shareholder, John Moxon, other directors of the company, and possibly other existing shareholders.
Conran will be entitled to appoint one director to the Bank board for as long as it holds more than a 20% stake in the three-strong restaurant company.
Moxon will invest up to a further £150,000, taking his stake to as much as 22.5%
Bank said in a statement: "The directors believe that the proceeds realised from the subscription, together with the funding available under a new long-term bank facility that the company has secured with Barclays Bank, conditional on completion of the subscription, will provide the group with the resources it requires to secure its financial position and pursue its ongoing strategy."
Conran says its investment in Bank is strategic. Initially, it expects to enter into an arms-length arrangement whereby Conran helps Bank with its sales and marketing.
But after the investment has been made, Conran intends to undertake a "due dilligence" study on Bank to determine whether it wants to make an offer to take over the whole company.
Bank's directors would recommend the offer to shareholders. The offer would be at a price of at least 3.125p per share, valuing the company at about £2.25m.
The announcement of the Conran deal came as Bank unveiled a £49,000 loss during the six months to 30 April, compared with a £4,000 profit during the same period a year earlier.
Turnover fell from £4.9m to £4.5m.
The company said: "Trading has begun to recover from the low levels experienced during the Iraq conflict, but London's West End remains more difficult."
Bank Alwych, in London's Covent Garden, had suffered from the drop in tourists and fall-off in theatre trade and sales were down on last year.
Bank Birmingham, however, was continuing to expand, particularly its private-dining business, with sales up on last year.
Bank Westminster had also seen sales ahead of last year, the company said.