UPDATE 3-New Look picks banks for possible IPO - source

* Picks JP Morgan Cazenove, Deutsche, Credit Suisse - source

* IPO decision to be made in the new year - source

(Adds company comment)

By Mark Potter

LONDON, Dec 2 (Reuters) - British fashion retailer New Look has chosen banks to handle a possible stock market return early next year, an industry source said on Wednesday, adding to signs of a pick up in Europe's new issues market.

The budget-focused chain, owned mainly by private equity firms Permira [PERM.UL] and Apax [APAX.UL], has hired JP Morgan Cazenove, Deutsche Bank (DBKGn.DE) and Credit Suisse (CSGN.VX), the source told Reuters.

It will decide after Christmas whether to pursue a flotation that some newspapers have said could value the fast-growing business at about 1.7 billion pounds ($2.8 billion).

"They're focusing on Christmas at the moment. An IPO (initial public offering) is an option, but it's one of several options," a New Look spokeswoman said.

The company declined to say whether it had appointed banks.

New Look is one of a number of retailers looking at a possible IPO next year amid rising equity markets and signs of a consumer recovery.

Other flotation candidates include online grocer Ocado, pet food specialist Pets at Home and fashion retailer Supergroup.

IPOs have been picking up across Europe, and have generally been well received by investors.

French retail and luxury group PPR (PRTP.PA) raised 806 million euros ($1.2 billion) on Wednesday after its Africa-focused unit CFAO attracted solid demand in a share sale, sources familiar with the matter said. [ID:nGEE5B10KU]

Italian online fashion retailer Yoox priced its IPO towards the upper end of an indicated range on Tuesday. [ID:nGEE5B00LT]

SECOND TIME LUCKY?

New Look was taken private by Apax, Permira and founder Tom Singh in 2004. The private equity firms abandoned an attempt to sell it in 2007 after failing to achieve a high enough price.

Another source familiar with the matter said any flotation was likely to take place in the first quarter of next year and would involve all, rather than just a part, of the company.

Founded in 1969, New Look has been one of the best performing British clothing retailers in the economic downturn and says it is the country's biggest seller of women's footwear, dresses and denim.

The group, which has over 600 shops in Britain as well as stores in France, Belgium and franchise businesses in the Middle East and Russia, outlined plans earlier this year to almost double its selling space in Britain over the longer term, as well as step up expansion abroad and online. [ID:nL7184098] (Additional reporting by Simon Meads; Editing by Victoria Bryan and Sharon Lindores) ($1=.6035 Pound) ((mark.r.potter@thomsonreuters.com; +44 20 7542-2943; Reuters Messaging: mark.potter.reuters.com@reuters.net))