John Hargreaves, chairman of Matalan, was given an ultimatum by board members over his plans to take the discount retailer private in a showdown yesterday at the company’s headquarters.
The board gave the chairman – who with his family controls 53 per cent of the company – four weeks to make an offer or step down.
The 62-year-old Mr Hargreaves also faced calls from the company’s biggest institutional shareholder to remove himself from the board, following the annual meeting in Skelmersdale yesterday.
Harris Associates, which holds a 6.9 per cent stake in Matalan, said the chairman should “step down and make a proper bid”.
David Herro, a fund manager at Harris Associates, said: “He should step off the board and then, if the deal does not get consummated, he could come back as a non-executive, but not as chairman.”
The fund manager said the “persistent instability” at the top of the company was disrupting the search for a new chief executive.
Mr Herro said the chairman had previously made a verbal commitment “to stand down” once a new chief executive was found following the news in January that John King was leaving – a surprise announcement that prompted the fourth executive search in five years.
“We would like him to stick to that commitment. The company can not live up to its potential with this constant instability in top management,” he said.
Board members are likely to resist an offer valuing the retailer below £820m, or 200p a share.
The stand-off at Matalan is widely seen as having reached an impasse, however, and as a majority shareholder Mr Hargreaves could play for time.
The board has not yet decided what action to take if its four-week deadline is not met, but there is thought to be the possibility they may resign en masse.