Matalan founder John Hargreaves has won more time for a potential £820 million deal to take the clothing chain back into his ownership.

Mr Hargreaves, who has control of the company as his family own 53 per cent of shares, has until October 11 to finalise plans after the Takeover Panel extended its "put up or shut up" deadline by a month.

The extension was backed by independent members of the Matalan board, who also revealed Mr Hargreaves was working on a possible offer worth 200p a share - equivalent to £819.7 million.

It had been thought Mr Hargreaves would table an offer of 190p a share, worth £778 million.

Matalan said today it believed it was in the best of interests of shareholders to allow Mr Hargreaves further time.

However, it added Mr Hargreaves still had the right to make an offer at a price of less than 200p a share, provided it had the support of independent directors.

Mr Hargreaves, who founded the company in 1985, has made no secret of his ambition to get the business back into private ownership.

David Herro, fund manager at Harris Associates, which owns 6.9 per cent of Matalan, recently insisted the company was worth 300p a share - or £1.2 billion.

But Richard Ratner, head of equities at Seymour Pierce stockbrokers, pointed out Matalan ran the risk of seeing the share price fall to 140p if it failed to come to an agreement with Mr Hargreaves.

He believed the most likely outcome could be an offer of 185p a share for a retailer with 190 UK sites.

In terms of the extension, Mr Ratner said: "We can only assume Mr Hargreaves may be having difficulty, without digging into his own pocket, in raising the cash needed. This is despite the fact that he already has around 53 per cent of the equity."

Matalan, which is based at Skelmersdale, west Lancashire, announced in late June its chairman was working on a possible offer - ending months of speculation.

The moves come amid tough conditions for the company, which announced underlying profits of £56.7 million for the 12 months to February 25, from £80.5 million a year earlier. Like-for-like sales tumbled by 6.9 per cent.

Shares closed at 172.25p.