Potential suitors circling Matalan are baulking at the £1.5bn price tag put on the value chain.
Sources said hopes of selling Matalan would be dashed unless the asking price was reduced. The mooted £1.5bn valuation is 10 times last year’s earnings of £145m.
Private equity vehicles including Advent, BC Partners and TPG are all interested in Matalan but will walk away unless better terms are offered. Blackstone has already dropped out of the process.
Last month, Matalan drafted in Goldman Sachs to advise on a sale alongside PricewaterhouseCoopers. The appointment of Goldman Sachs was taken by some observers as a sign that more momentum was needed if a deal was to be struck and that the bank could also help with financing arrangements.
It is understood that interested bidders will submit second round offers for Matalan next month.
John Hargreaves, who founded Matalan, and then floated and took it private for £817m in 2006, is not thought to be under pressure to do a deal so may choose to retain ownership if he is unhappy with any offers received.
No comment was available from Matalan.