The clearance, which had been expected, pushed Argos shares 20.5p higher to 645p on expectations that GUS would need to increase its existing cash offer of 570p to seal victory. GUS shares closed 232.5p higher at 765p.
The decision also re-starts the bid timetable and Argos will now publish its final defence document on Friday. Analysts expect the company to announce plans to return pounds 350m-pounds 400m to shareholders.
GUS hit out at Argos, saying the "quick fix" solutions of Stuart Rose, the new chief executive, threatened the business's prosperity. Lord Wolfson, GUS's chairman, said plans to increase margins risked alienating Argos's customer base and that sharing its customer data with Littlewoods in a planned fashion mail order joint venture was "folly".
Mr Rose countered by saying: "On Friday when we add our financial arguments, we will demonstrate to shareholders that the substantive value of their business makes GUS's bid look woefully inadequate."