LOS ANGELES, United States — American Apparel Inc.'s takeover discussions with Irving Place Capital, which proposed buying the clothing chain for as much as $1.40 a share, have stalled, according to four people with knowledge of the situation.

Irving Place, a private equity firm that approached the retailer about an acquisition last year, has grown uncertain about its proposed valuation after months of dealing with American Apparel, said two of the people, who asked not to be identified because the matter is private. The prospective bidder also felt that American Apparel’s board was more interested in raising capital and trying to turn around the money-losing chain than finding a buyer, the people said.

A separate person familiar with American Apparel’s thinking said the board is still considering a sale. More than 10 entities, including Irving Place and potential strategic acquirers, have signed nondisclosure agreements to look at the company’s books, the person said.

An Irving Place deal might have returned founder and former Chief Executive Officer Dov Charney to American Apparel after his ouster last year. The New York investment firm had discussed bringing back the controversial executive in some capacity if it acquired the Los Angeles-based clothing company, people familiar with the matter said in December.

American Apparel shares rose 2.6 percent to 79 cents as of 3:29 p.m. in New York. The stock had climbed to $1.14 in December on news of the interest from Irving Place.

Board Discord

The handling of the takeover interest from Irving Place has contributed to discord on the board and may be part of the reason Robert Mintz resigned as a director earlier this month, according to three of the people. Mintz, a childhood friend of Charney, joined the board in August as an appointee of Lion Capital. While serving as a director, he met with Irving Place about its takeover interest, the people said. Mintz didn’t respond to multiple requests for comment.

Lion, a London-based private-equity firm that has allied itself with Charney, will replace Mintz with Jeff Chang, one of its own executives. Chang will join Lion co-founder Lyndon Lea, who became a board member after Charney was fired. Lion has the right to name two directors because of stock warrants it holds that equal about a 12 percent stake in the company.

Charney, meanwhile, has been pushing for his return since he was suspended in June for alleged misconduct, which ranged from violating sexual harassment policies to misuse of funds. Charney’s lawyer has called the allegations “baseless.”

Standard General

In his fight to get his job back, Charney forged a deal last year with hedge fund Standard General. He borrowed funds from the firm to increase his American Apparel stake to 43 percent of outstanding shares, agreeing to share voting rights in the process. Standard General also pledged to pump $25 million of financing into American Apparel.

But Standard General didn’t reinstate Charney at the clothing chain, and he was ultimately fired in December. Although the board offered Charney a deal to stay on as an adviser, he turned down the proposal because of concerns that Standard General had too much sway over the company, people familiar said. Charney said later that month that the hedge fund double-crossed him.

“I gave them my entire life’s work and they agreed to put me back in,” he said. “They betrayed me.”

Standard General, based in New York, has now had a hand in selecting five of American Apparel’s nine directors. It has infused $10 million of its promised $25 million into the clothing company, which is completing the paperwork to receive the remaining $15 million, two people familiar with the process said.

American Apparel has borrowed funds several times in recent years to stay afloat, and it’s still grappling with red ink and looming debt payments. The company has an interest payment on its bonds of more than $13 million due next month. The chain, which hasn’t reported fourth-quarter results yet, had $9.4 million in cash at the end of the third quarter. It had to sell stock last year to help cover an interest payment.

By Matt Townsend, Jodi Xu Klein; editors: Nick Turner, James Callan.