More than pounds 650m now separates Whitbread's all paper bid from that of Punch. With its share price falling like a stone, it's hard to see how the gap can be bridged. David Thomas, chief executive, shouldn't need all those highly paid City advisers to know that raising the shares bid would be a zero sum game while the share price continues to fall. It would also be hard to the point of near impossibility to underwrite more shares for cash in such circumstances.
Theoretically, Whitbread could abandon the shares offer altogether and go for a straight cash bid, but it's going to have to come up with some very convincing explanations to pull off such a change in stance. On the evidence of this battle so far, the company doesn't have them.
Up until the time the deal with Allied was announced, Whitbread's stated strategy was to expand in leisure and hotels - not the supposedly "low growth" pubs market. Still, no matter. While the price of the Allied pubs remained such a steal, the apparent volte-face in strategy could be justified to the City as an opportunity too good to miss.
That's now changed. To win, Whitbread must pay through the nose. Given the way it has mishandled the action so far, nobody is going to believe that can be justified. Unfortunately, you cannot tell an Ostrich to take its head out of the sand. Allied shareholders, by contrast, are sitting pretty with a price much higher than originally foreseen. Regrettably, this is nothing do with their board of directors, who seem to have done their damndest to deprive investors of the benefits of an auction. Sir Christopher Hogg, the chairman of Allied, insists that the priority all along has been to make sure that shareholders had some sort of deal, and that's why he agreed the exclusivity clauses with Whitbread.
In doing so he seems to have forgotten the first rule of selling - always make sure there's a competing offer to bid up the price.