Baugur, the Icelandic investment group, is facing its most fraught takeover battle since coming to Britain after making an indicative £40 million bid for Moss Bros, the 157-year-old menswear chain.

The move immediately sparked a boardroom split, and the two families at the heart of the retailer made a savage attack on Baugur and Moss Bros's management over the way that the company has been run.

David Moss, a former director and great-great-grandson of Moses Moses, the Moss Bros founder, said that he had started talks to find a new chairman who could better defend investors' interests in the coming weeks.

He said: “The family quite clearly feels that the price is too low. The business has great brands, great opportunities, but hasn't been managed well enough, and that is why it is in this pathetic position.

“The thing that is really galling is that the chairman, Keith Hamill, announced in November that he intended to step down and there has been no real attempt to replace him since.”

Michael Gee, another former director, said that Baugur's presence on the shareholder register in the past 18months and its closeness to Philip Mountford, the Moss Bros chief executive, had hampered any real hope of a turnaround.

Mr Gee said: “Baugur has been like a ball and chain around the feet of this company. It's clear to me they have just wanted to pick it up on the cheap.”

Moss Bros revealed yesterday that Baugur had made an indicative offer of 42p a share and that the Icelandic group had been granted due diligence, likely to last four weeks. Mark Bernstein, a board director close to the Moss family, dissented from the decision.

The company's statement came with a fresh profit warning and news of a reorganisation that will almost certainly lead to job losses among Moss Bros's workforce of 1,200.

Baugur first took a stake in Moss Bros as part of the Unity investment vehicle alongside FL Group and Kevin Stanford, the co-founder of Karen Millen, in the summer of 2006.

Unity has a 28.75 per cent shareholding and two directors on the Moss Bros board, including Don McCarthy, the chairman of House of Fraser, itself now part of Baugur's UK portfolio. Between them, the Moss and Gee families control about 27per cent of the shares in Moss Bros. The retailer bought Cecil Gee in 1988.

Analysts said yesterday that, despite the families' opposition, Baugur was likely to succeed in its bid. Laura Ashley, the womenswear and home furnishing chain, has built a minority stake but experts believe that it is unlikely to want to go head-to-head with Baugur. Shares in Moss Bros rose 2p to 41p yesterday. They were trading at 130p three years ago.

Andrew Wade, a Seymour Pierce retail analyst, said: “I don't think that Moss Bros is likely to get too much more than 42p a share. They are not going to hit their targets this year. It's a difficult market and it's not going to get any easier.”

Mr Hamill said that Baugur would be able to restructure the company far more quickly in the private sector. Baugur refused to comment, but a source close to the group said that it was as frustrated as anyone else by the downturn in performance.

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