Carrgran, the bid vehicle that has had two offers for Arnotts rejected by the company's board, is still considering making a higher offer for the retail group.

The company, controlled by Lehman Brothers, corporate financier Mr Peter O'Grady Walshe and former Arnotts trading manager Mr Mark Delaney, said the Irish Takeover Panel had given it a deadline of January 17th to decide whether to make a further offer.

The deadline can only be extended with the Arnotts board's support.

"Carrgran is continuing to review its position and to evaluate whether to make a higher proposal," the company said in a statement issued last night.

It said it would reach a decision by the close of business on January 17th and a further announcement would be made by that date.

It also said that, in addition to its equity participation in Carrgran, understood to be of the order of 90 per cent, Lehman Brothers has conditionally agreed to provide bank facilities to fully finance the offer. It is understood that this is subject to satisfactory due diligence on Arnotts being carried out.

Carrgran has made two offers for Arnotts, which owns Ireland's largest department store. Its first offer of €11.50 per share was rejected by the Arnotts board last June. A second offer of €11.80 per share was rejected by the Arnotts board last month. The board said the offer failed to reflect adequately the value of Arnotts' business and its prospects.

Analysts and fund managers have said that Carrgran will have to pay upward of €13 per share to gain control of the company.

"Given the deteriorating economic backdrop, in or around €13 would be an acceptable bid," said Merrion analyst Mr Peter Frawley.

Carrgran said it remained willing to meet the board of Arnotts or its advisers to discuss its approach. Carrgran has indicated in the past that it will not initiate a hostile takeover but wants to pursue a recommended offer instead.

In many ways it has no choice as a hostile approach would have little chance of success given that Arnotts' shares are so tightly held.

Close to half of Arnotts is controlled by staff, directors and three large institutions. The Arnotts pension fund holds 12.8 per cent of the retailer while a further 10 per cent is owned by the Nesbitt family. Arnotts shares closed 10 cents higher last night at €11.50.