GUS has tabled a 570p cash bid, valuing Argos at pounds 1.6bn. However, Argos's share price has consistently stayed well above that level, suggesting that investors expect GUS to raise its offer. Last Friday, Argos shares closed at 646p, valuing the company at pounds 1.85bn.
City opinion is split on how much Lord Wolfson, GUS's chairman, would have to raise his offer in order to win the battle. Some analysts argue that no less than 670p will do, while others suggest that GUS may not even have to raise its offer at all.
Although no decision has been made, GUS is thought to have put a ceiling of 650p on any offer it makes.
Last Friday, Argos published the final part of its defence, unveiling plans to return pounds 431m to shareholders if they reject GUS's offer. The move will load the company up with debt, although Stuart Rose, the chief executive who was brought in to run Argos after GUS tabled its bid, argues its profits will still cover the interest bill by a comfortable 5.5 times.
Lord Wolfson, GUS's chairman, spent the weekend discussing tactics with his advisers. The most pressing question is whether GUS could take the almost unprecedented move of offering less than the current market price and still convince Argos shareholders to accept the bid.
As a result GUS and Merrill Lynch, its financial adviser, are expected to watch carefully for any movement in Argos's share price on Monday before making a decision.