Green 'must offer more than 400p a share to win Arcadia support'

Arcadia would reject an improved offer for the business from the retail entrepreneur Philip Green unless it was more than 400p a share.

The high street fashion group, whose chains include Dorothy Perkins, Burton Menswear and Miss Selfridge, has already rejected Mr Green's original 365p offer as too low. This put a total value on Arcadia of £720m. City analysts had previously speculated that around 400p a share might be enough to push the company to recommend the offer or tempt shareholders to accept it.

However, Stuart Rose, Arcadia's chief executive, is believed to feel that only a figure north of 400p and possibly as high as 420p would be enough. "If Philip Green had offered 405p that might have put Stuart in a more difficult position," one source close to the company said. "If an improved offer is just another 15p it will dismissed out of hand."

It is understood that Arcadia does not believe that Mr Green will raise his offer by more than that as he prides himself as buying businesses on the cheap. "I think the gap between what Arcadia sees as good value and what Philip Green sees as good value is unbridgeable," the source said. Mr Green declined to comment.

Arcadia believes its shares should be valued in line with the average for FTSE 250 retailers. But Mr Green's camp has focused on whether Arcadia's recovery is sustainable and that a discount to the sector is merited. It is not thought that Mr Green will make any new move until the weekend at the earliest.

Arcadia says it has improved the business substantially in the past 18 months, making the group less vulnerable in a downturn. It says this has not yet been reflected in its stock market rating.

The company says its will be debt free from the end of this month and that it has reduced the ratio of fixed costs to sales by 2 percentage points. The business is budgeting for like-for-like sales growth of below 3 per cent this year but says costs would be in line with that, enabling profit enhancement. However, the business recognises that it has achieved its turnaround in a benign retail climate and against a Marks & Spencer that was only at the earliest stages of its recovery.

Arcadia's shares closed 2p lower at 350p.