Matalan 'should not sell for bargain price'

The largest non-family shareholder of Matalan today said the discount clothing retailer was worth a lot more than founder John Hargreaves is planning to pay for it.

David Herro, fund manager at Harris Associates, which owns 6.9% of Matalan, told The Sunday Telegraph that Matalan is worth 300p a share, or £1.2bn (€1.7bn).

The figure is well above the 170p to 200p a share price range that Mr Hargreaves is thought to be planning to bid. Shares in Matalan closed at 173p on Friday night, valuing the retailer at £709m (€1m).

Mr Herro told The Sunday Telegraph: “We think that Matalan is worth 300p (a share) if run properly.”

But Mr Herro said that he did not think Mr Hargreaves – who is chairman of Matalan and whose family owns 53% of the company – will pay that much.

“Given that the chairman owns 53%, the non-executives have limited bargaining. We might not get £3 but we need to get somewhere in the twos,” Mr Herro said.

He added that a bid of between 170p and 180p a share was “not acceptable”.

Matalan revealed that Mr Hargreaves was working on a possible takeover of the company at the end of last month, although a potential bid price has not been mentioned.

It followed weeks of speculation in the City that Matalan could be taken back into private ownership.

It also emerged, however, that Mr Hargreaves had fallen out with the rest of the board over dividend payments which he believes are too generous.

Matalan said it had been told by Mr Hargreaves that the annual dividend of 6p a share was too high when compared with other comparable UK quoted retailers, although he did not oppose it at last week’s AGM.

Matalan, which was set up by Mr Hargreaves in 1985, recently posted underlying profits of £56.7m (€81.9m) in the 12 months to February 25, compared with £80.5m (€116.3m) a year earlier as sales tumbled.

But last week it signalled it may have seen the worst of its trading blues after like-for-like sales held firm for nine weeks following a 2.2% fall it reported in May.