GREAT Universal Stores broke the acquisition mould yesterday with its #1676m takeover bid for the Argos catalogue shopping group.

The first ever hostile offer by GUS values each Argos share at 570p, which is a 40% premium over the 406p on January 27, the day before GUS chairman Lord Wolfson met Argos chairman Sir Richard Lloyd to discuss a

merger.

In the subsequent two business days, Argos shares rose by 21.5p and 21p respectively, closing on Monday night at 442p.

There was another meeting between the two sides on Sunday but they failed to reach agreement.

Argos immediately rejected the offer as opportunistic and said it failed to recognise the company's strategic value, its track record and its prospects.

Argos shares responded by leaping 188p to 630p as the market sensed that GUS would raise its terms to secure the agreement of the Argos board, where chief executive Mike Smith has stood back because of illness.

Argos is now looking for a chief executive designate.

GUS shares jumped 29p to 762p for a market capitalisation of around #7527m as the Argos move was seen as a logical

expansion bid.

Argos was founded in 1973 by Green Shield Stamps tycoon Richard Tomkins and was acquired by British American Tobacco in 1979.

It was floated in 1986 and for several years enjoyed a strong market following. But in the last year, it has issued three profit warnings, with one on January 16 showing that same store sales had dropped 1.5% in the Christmas period. Shares slid 12% to 442p.

It has planned to move into home shopping, which would start this August in all the 418 stores at a cost of #12m to #14m.

However, it was talking about such move as far back as 1993.

Argos has forecast that 1997 profits excluding exceptionals will be slightly ahead of the previous year's #134m.

It has been hard hit in traditional areas of strength such as toys, jewellery and small electrical items by increasing competition from conventional High Street retailers such as Woolworth, Dixons and H Samuel.

But it said it was going ahead with a planned 41 openings.

For nearly a half century, Manchester based GUS was a byword for conservatism and stability with its first profits reversal in all that period occurring only last year and that being due to the strength of sterling.

For many years, the powerhouse was the home shopping division - it had 40% of the agency mail-order business with catalogues such as Kay's, Great Universal

and Choice.

These were augmented by direct catalogues with Marshall Ward and Innovations for a total customer list of seven million. But since Lord Wolfson of Sunningdale became chairman in 1996 - he is also chairman of the Next clothing retailer - GUS has become very active.

This has included the #1040m acquisition of the Experian customer information group in the US, which, with CCN in Britain, provides credit ratings on both individuals and businesses as well as on motor vehicles and property.

It is now the largest contributor to group profits, which last year amounted to #571m. Other significant activities include the Burberrys upmarket clothing ranges, finance and a property venture with British Land. It nursed a cash mountain for many years and, before the Experian purchase, had more than #1200m invested in money market

instruments.

To help finance the Argos deal, it has arranged bank facilities through Barclays and Merrill Lynch amounting to #1600m.

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