Punch, the privately owned pub company, is spending the weekend in final discussions with Allied's advisers, Goldman Sachs. If Punch decides to raise its pounds 2.85bn bid, the growing support of other Allied Domecq directors should mean that it prevails over Whitbread's rival cash and shares offer.
Victory would be a vindication for Hugh Osmond, Punch's managing director, who has been a constant critic of Allied's original agreement to sell the 3,600 pubs to Whitbread. Mr Osmond matched his bluster with a pounds 2.7bn cash bid which trumped the original Whitbread pounds 2.3bn all-share offer. On Friday, Whitbread came up with a revised cash and shares offer, currently worth pounds 2.87bn, but not before Punch had added another pounds 150m to its offer.
Relations between Allied and Whitbread have soured since the original deal was announced, and Mr Bowman's opposition to a deal with Punch has made him increasingly isolated on the Allied board. The growing mood of some Allied directors is unlikely to have been improved by Whitbread's threat to take out legal action against the company if Punch prevails.
Punch's pounds 2.85bn offer will expire on Monday if Allied Domecq refuses to recommend it to a shareholder meeting likely to take place next week. The final value of Whitbread's rival bid depends on the performance of its share price on Monday, but the company is considered unlikely to pay any more for the pubs. Several Whitbread directors are already believed to be concerned at the escalating bid battle.
Punch is more likely to up the ante. It has the backing of US buy-out specialist Texas Pacific as well as the support of Bass, the pub and hotel group which has thrown about pounds 1bn behind Punch's bid.