Baugur, Tesco, Wal-Mart in the frame
Shares in fashion and homewares discounter Matalan reached a 12-week high this morning as rumours circulated that it has become a bid target.

Matalan's shares were up 11.5p to 213p at 9.00 am, but slid back down to 207p an hour later. City dealers have cited Wal-Mart, Baugur and Tesco as possible potential bidders for the company.

However, both Wal-Mart, through Asda, and Tesco are understood to have refused to comment on the speculation, as has Matalan. A source close to Baugur has dismissed rumours that it has designs on Matalan.

Shore Capital analyst John Stevenson also took the rumours with a pinch of salt, acknowledging that both Tesco and Asda would benefit from the increased market share of the value non-food sector. However, some recent events at Matalan leave him to believe that the clothing retailer is not aware of any interest from third parties.

Stevenson pointed out that Matalan last bought its own shares on July 14, ruling out any knowledge of an approach by the management. He also noted that former Matalan board director Nick Beighton left the retailer last month. Stevenson concluded that it would be unlikely for a main board director to leave Matalan if it was in any discussions with another retailer.

On July 7, Matalan said its like-for-like sales had fallen 6.5 per cent and total sales decreased by 1.5 per cent in the nine weeks to July 2. However, gross margins had risen in the period by 1.5 per cent.