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Hopes of white knight for Argos fade

INVESTORS' hopes that Argos might find a "white knight" in its defence against the pounds 1.6bn hostile bid from Great Universal Stores received a setback yesterday when it emerged that one of its directors had bought pounds 10,000 of shares in the company.

Peter Birch, the outgoing chief executive of Abbey National, who is a non-executive director of Argos, acquired 1,557 Argos shares at 615p on Monday and notified the Stock Exchange on Tuesday. Under Takeover Code rules a director cannot buy or sell shares if he is in possession of any price sensitive information that is not known by the whole market. This would include any meetings, or plans for meetings, with any other potential bidder. GUS's advisers immediately pounced on the share purchase, saying it meant Argos had not found a white knight and that its 570p bid was therefore unlikely to be trumped by another suitor.

Market speculation has suggested that other possible bidders could include Otto Versand of Germany and La Redoute of France. However, both are mail order companies and may not be interested in over 400 high street outlets.

Argos' advisers agreed that no other talks were taking place, or were planned with other potential bidders. But they added that another party could still enter the fray at a later date. "A white knight wouldn't come in at this stage anyway," an Argos spokesman said. They added that Mr Birch's decision to buy shares simply reflected his confidence in the company's future.

Argos' shares have been trading consistently above GUS' offer price, partly due to hopes of another bidder and partly because investors feel GUS will have to raise its offer to succeed.

GUS made further progress yesterday when its shareholders voted to approve the bid. It is expected to respond further to Argos' defence document of last week in the next few days.

The Argos defence has got off to a rocky start with two directors either ill or about to leave. Argos has appointed an acting chief executive because Mike Smith is unable to fulfil his duties due to ill health. And it emerged last week that its finance director, Bob Stewart, will be stepping down later this year to take early retirement.

However, Stuart Rose, the new chief executive, has promised to put up a strong fight to keep Argos independent.

Argos shares were unchanged at 614p yesterday. GUS closed 1.5p higher at 798.5p.