US investor seeks to oust Matalan chairman

The top US fund manager who ousted the Saatchi brothers from their own business is seeking to repeat the trick at Matalan by voting against the re-election of the discount retailer's chairman who founded the business.

Harris Associates, Matalan's biggest institutional investor with a 7 per cent stake, will vote by proxy today against the re-election of John Hargreaves, who is trying to take the retailer private in a £800m-plus deal.

David Herro, who has made a name for himself as an activist shareholder, will know he stands no chance of affecting the outcome of the re-election vote as the Hargreaves family speaks for 53 per cent of the stock but the move is symbolic.

Mr Herro, the chief investment officer of international equities at the Chicago-based Harris Associates, told Bloomberg News: "We're of the belief that, especially given the situation, Mr Hargreaves should not be chairman."

Matalan revealed on Friday night that Mr Hargreaves was hoping to mount a takeover bid after its independent directors clashed with its chairman after he threatened to withdraw support for the group's dividend policy. The prospect of a lower payout would dampen the value of shares in the company were it not for bid speculation.

The company's independent directors are anxious to ensure all its minority shareholders, including Harris Associates, are treated fairly and not short-changed by any eventual bid from Mr Hargreaves.

Mr Herro said: "We are very confident there is a sound, independent board in place that will make sure the shareholders are all treated equally."

Mr Hargreaves is due to meet his fellow directors at a board meeting today in the retailer's west Lancashire head office in Skelmersdale. He will then chair the annual shareholders' meeting, at which he will face the challenge from Harris Associates to his re-election. The only other director seeking re-election is Martin Reavley, the former finance director at Kesa Electricals who is first bursar at King's College, Cambridge.

Mr Herro sprang to fame in the early 1990s when he used Harris's 10 per cent shareholding to help orchestrate the coup that presaged the Saatchi brothers' departure from Saatchi & Saatchi. At the time, Mr Herro had support from Robert Louis-Dreyfus, the then head of Adidas and a former chief executive of the advertising group.

More recently Mr Herro has held shares in Aegis and Euronext. He was one of the most vociferous shareholders during Greg Hutchings' dying days as chief executive of Tompkins, helping force him out after it emerged that his wife and housekeeper were kept on the company payroll.

It is thought Mr Hargreaves is still seeking all the funding he needs for a bid, although he has lined up some financial backing from Barclays Capital.