Investors were yesterday betting on a higher offer for Debenhams after the department store group agreed a £1.7bn bid from the retail dealmaker John Lovering and the private equity firms CVC Capital and Texas Pacific.
Leading shareholders criticised as inadequate the 455p level of the offer, which sparked speculation over the future of Belinda Earl, the group's chief executive.
She is likely to be passed over for the top executive post in favour of Robert Templeman, the former Homebase chief executive who is also part of the CVC-Texas consortium.
Ms Earl had hitched herself to the original, lower offer from the venture capitalist group Permira, which had been pitched at 425p-a-share.
Mr Lovering's long-awaited bid made little mention of the future management structure of the company. Mr Templeman is a director of the consortium and he worked closely with Mr Lovering when he was chairman of Homebase, the DIY chain sold to GUS last year.
Debenhams closed up 5 per cent at 458.5p as speculators bet the Permira consortium - chaired by ex-Arcadia boss Stuart Rose - might yet come back with a higher bid. Permira said it was considering its options but its next move may not come for some weeks.
Standard Life, Debenhams' third biggest shareholder with a 4.8 per cent stake, spoke out yesterday against the higher offer. David Cumming, head of UK equities at the fund manager, said: "The offer for Debenhams from CVC Capital and Texas Pacific still materially undervalues the company's medium-term prospects."
Ms Earl is expected to begin negotiating her future next week, although it is not clear she would wish to accept a role subordinate to Mr Templeman. Both sides said no talks had been held because of Ms Earl's identification with the Permira deal, under which she and the management team would have received up to 3 per cent of the equity.
Ms Earl came under fire for her involvement with Permira at such an early stage. There will be similar equity-based incentives for management under the CVC/Texas Pacific deal, too, if it goes ahead.
The 455p price tag was higher than had been expected so as to win the unequivocal backing of Debenhams' independent directors, including the chairman, Peter Jarvis. It valued the company £110m higher than the Permira offer.
Permira had received the board's backing in July, but CVC/Texas Pacific were being offered £1m a week to investigate making a rival offer. Because an offer has been made, that money will not be paid, but the consortium will receive an £8.5m break fee - equivalent to the break fee owed to Permira - if the deal does not go ahead. A Debenhams spokesman said: "The board have come in for a lot of criticism over how they have run this process but it is hard to argue that it hasn't worked to shareholders' advantage."
Other institutional shareholders said they would wait to see if a higher bid emerges. A quarter of the shares are owned by hedge funds which are likely to approve the highest cash offer.
Nick Bubb, an analyst at Evolution Beeson Gregory, said Permira could bid higher. "Given the strong cash flows in the business, there looks to be more to go for," he said.
The CVC/Texas Pacific consortium also has equity funding from Merrill Lynch Global Private Equity and £1.2bn of debt financing underwritten by Morgan Stanley and CSFB.