The board of Arnotts has rejected a second takeover offer for the company at a price of €11.80 per share. Carrgran, a bid vehicle for corporate financier Mr Peter O'Grady Walshe, former Arnotts trading manager Mr Mark Delaney and Lehman Brothers, made its latest offer for the retailer late last week.

It was its second bid for the country's largest department store. Its first offer, of €11.50 per share, was rejected by the Arnotts board last June.

Earlier this month, Carrgran announced it had made the offer and said it was continuing to review its options, including making an offer for the company.

But its latest attempt to gain control of Arnotts has again been rebuffed by the company's board.

"Having considered the approach, the board has categorically rejected it as failing to adequately reflect the value of the business of Arnotts and its prospects," the company said.

"The company notes that the revised proposal represents a minimal increase of 2.6 per cent to the earlier proposal of June 2002 which was also rejected as inadequate."

A spokesman for Carrgran said last night that it just received this communication from Arnotts and would respond in due course.

Arnotts shares closed unchanged at €11.50 last night.

Whether Carrgran will up its offer remains to be seen but most analysts and fund managers believe it will have to pay upward of €13 per share to gain control of the company. NCB Stockbrokers believe Arnotts may be worth even more, suggesting an offer of at least €15 per share will be needed to gain control of the company.

Carrgran has indicated that it will not launch a hostile takeover process, choosing instead to pursue a recommended offer. Given that nearly half of the shares are in the hands of staff and directors and three institutional investors, a hostile approach would have little chance of success.

The shares are very tightly held with the staff pension fund controlling nearly 13 per cent of the stock while a further 10 per cent is owned by the Nesbitt family, with company chairman Mr Michael O'Connor holding 3.5 per cent.

Bank of Ireland Asset Management, Fidelity and Aberdeen Asset Management are also substantial shareholders.

The Arnotts board, which has considered the offers, is unlikely to let the company go cheaply. Among the non-executive directors are the chairman of Davy Stockbrokers, Mr Brian Davy, and former Jefferson Smurfit executive Mr Howard Kilroy.

Arnotts, which sponsors the Dublin Gaelic football team, posted a 20 per cent rise in pre-tax profits of €6.7 million for the first half of this year on sales of €90.6 million. Sales of Dublin jerseys and the World Cup Finals helped boost performance.