Mike Ashley, the secretive sportswear billionaire, has held talks with Matalan about a joint venture that may lead to him taking a large stake in the business. Ashley has drawn up plans for Sports World units to be opened above Matalan stores, in specially constructed mezzanine floors. As part of the plan it is thought 41-year-old Ashley would take a stake of up to 25 per cent in the troubled discount retailer.

The entrepreneur is also believed to be demanding a generous options package. Talks between Ashley and John Hargreaves, the founder and majority shareholder in Matalan, began last summer and have continued into this year. However, they are understood to have stalled in recent months. Bankers said the talks could be revived, although Ashley would have to win over Hargreaves, who owns a 53 per cent stake in the retailer.

At its peak in 2000, Matalan was worth more than £3 billion, but the share price has fallen sharply over the past five years. The shares closed last week at 170p, putting a value of less than £700m on the retailer. A spokeswoman for Matalan confirmed that discussions had taken place, but refused to comment on the details of the talks.

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