Hargreaves bid for Matalan

John Hargreaves, chairman and majority shareholder of Matalan, is expected to make a bid for the discount retailer he founded this week. Hargreaves and his family control 53 percent of the company, which he founded some twenty years ago. He and the board of directors are momentarily embroiled in a battle over the future of the retailer. Against his wishes, the board issued a statement on Friday stating that Hargreaves was working on a possible offer. “The non-executive directors have stuck together to make this stand,” a source close to the company told the FT. “They know this might lead to all of them being sacked.” The statement was in reaction to Hargreaves intended cutting of dividends. The board members felt it was their duty to minority shareholders to disclose the information, however, according to the FT, this was seen as a move to reduce the value of the shares and help achieve a lower bid. The board will not accept a bid lower than £820 million or 200p per share, a premium on the company’s market capitalization of £691 million. “He is going to have a fight on his hands if he bids too low,” a source close to the board told the FT.

Matalan saw earnings drop from £80.5 million to less than £55 million last year. The retailer suffered increased competition from other discount clothiers like Primark. Furthermore, the internal turmoil – which sees the company searching for its fourth chief executive in five years – has left the firm weakened. Hargreaves has said repeatedly that the public company is undervalued by the market. It lost two-thirds of its value since its peak in 2001. Meanwhile, Matalan’s bankers Barclays have been asked to and have agreed to arrange the buy-out.

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