American Apparel, the Los Angeles-based casual clothing chain headed by controversial co-founder Dov Charney, is being sold to a publicly traded investment group for $385 million, the New York Times reports.

The sale of the company to Endeavor Acquisition Corp. was unexpected given Charney’s hands-on management style, which includes designing and manufacturing all the clothing in the company’s downtown Los Angeles warehouse location. American Apparel has 145 retail outlets.

However, the retail chain, founded in 1998 and known for its tight t-shirts, has seen its explosive growth slow. The Times reports that the key retail indicator of same store sales growth fell to just 7 percent in 2006, from 45 percent last year and 74 percent in 2004.

Endeavor was founded last year by Jonathan J. Ledecky, who started U.S. Office Products in 1994 and turned it into a Fortune 500 company. The Times, which cited “people briefed on the matter” as sources for its story, said Ledecky wants to expand the chain into 800 stores worldwide, equivalent to Abercrombie & Fitch.

Endeavor will pay $250 million in unrestricted stock, assume $110 million in debt and pay out $23 million in bonuses, restricted stock and stock options to certain employees, the Times reports. It’s unclear how much Charney’s take will be.

Charney will remain at the helm of the company despite a controversial management style that has resulted in sexual harassment lawsuits, the Times reported. He personally takes the photographs of semi-naked women that are used in his company’s advertising and has admitted to sleeping with employees, but has denied the harassment charges.

American Apparel declined immediate comment about the sale, saying its chief spokesperson was on a plane and unavailable.