Matalan worth more than its bid

Matalan is worth at least a third more than John Hargreaves, its founder and majority shareholder, is seeking to pay for it, according to the largest non-family shareholder. David Herro, fund manager at Harris Associates, which owns 6.9 per cent of Matalan, believes that the chain is worth 300p a share, well above the 170p to 200p Hargreaves is planning to bid for it.

Herro has urged Hargreaves to exercise "sound moral judgment" and not try to buy the company on the cheap. "We think that Matalan is worth 300p if run properly," Herro said. However, he added that Hargreaves, whose family owns 53 per cent of the chain, is unlikely to pay this much. "Given that the chairman owns 53 per cent, the non-executives have limited bargaining. We might not get £3 but we need to get somewhere in the twos," he said, adding that a bid of between 170p and 180p a share is "not acceptable".

A banker close to Hargreaves described a 300p-per-share offer as unrealistic. He said that a bid of between 180p and 190p would represent a multiple of earnings before interest, taxation, depreciation and amortisation of up to 8.8, which is higher than comparable recent deals. Matalan's shares closed on Friday at 173p.