Matalan likely to accept £817m bid from founder

The board of Matalan, the discount clothing retailer, is expected to accept an £817m bid this week from the company's founder and chairman John Hargreaves.

He has to table the 200p-a-share offer by noon on Wednesday when a Takeover Panel deadline expires, or he will have to walk away for six months.

Mr Hargreaves, together with his family, already controls 53 per cent of Matalan. He has won financial backing from Barclays Capital and the deal is thought to be on track.

The Takeover Panel gave him and his backers an extra month to make a firm offer as he wanted to see how well the company's autumn ranges were doing.

Mr Hargreaves had reserved the right to make an offer of less than 200p a share should trading disappoint.

But Matalan then unveiled the first rise in like-for-like sales for two years - an increase of 1.3 per cent in the two months to 26 August - defying rumours of a big drop and proving that the retailer's recovery plans are beginning to bite.

It overhauled its product ranges and hired the TV presenter Melanie Sykes to model the spring and summer collections.

Shares in Matalan received a boost from the figures last month and have climbed to 182.5p at Friday's closing price.

The improvement in performance boosted hopes of an £817m deal between Mr Hargreaves and Matalan's independent directors, who include Lord Harris of Peckham, the founder of Carpetright, Geoff Brady, the former chief executive of Allied Carpets, and Bill Shannon, the former managing director of restaurants at Whitbread.

Some critics have accused Mr Hargreaves of trying to buy the company on the cheap. He founded the chain in 1985 and is expected to cash in as much as £50m of his equity out of the retailer as part of the deal.

Matalan is the latest in a string of companies that have received management buyout approaches from their founders.

However, some have failed: last week, Kevin Lomax, the chief executive of the software firm Misys which he founded in 1979, quit after his attempt to take the company private was rejected.