Arnotts shares added 55 cents to €12.50 yesterday as the company said a number of its directors were considering making a rival offer for the company.

It also said it was setting up an independent committee of the board to deal with the approaches to the company from both the directors and Carrgran, which has offered €12.75 per share for the retailer.

The committee, which will comprise independent directors Mr Brian Davy, Mr Howard Kilroy and Ms Casey Tolar, again dismissed Carrgran's indicative offer as failing to "value the business and its prospects adequately".

However, it has asked its financial advisers IBI Corporate Finance to engage with Carrgran to see if it is willing to make an improved proposal.

The independent committee has also requested that the Irish Takeover Panel remove the previously imposed deadline of January 31st for Carrgran to make a firm offer for the company, saying it was "no longer appropriate".

The panel has agreed to the request.

A spokesman for Carrgran, which is backed by US investment bank Lehman Brothers, said last night that it looked forward to presenting its proposals to the independent committee.

Carrgran also includes corporate financier Mr Peter O'Grady-Walshe and former Arnotts trading manager Mr Mark Delaney.

Meanwhile, it is believed that most of the company's directors outside the three members of the independent committee are among those mulling a bid.

They include Arnotts' chairman Mr Michael O'Connor, who holds 3.5 per cent of the company, and Mr Richard Nesbitt, who represents the Nesbitt family, holders of nearly 10 per cent of the stock, on the board.

A number of the same directors was also involved in considering a management buyout (MBO) of the company early last year which failed to materialise.

The independent committee cautioned yesterday that despite the latest developments, there was no certainty that a recommended offer would be forthcoming.

Arnotts' main trade unions, SIPTU and Mandate, reacted cautiously to yesterday's announcement, saying they would now be seeking to be fully informed on the latest developments.

The value of the retailer, which owns the largest department store in the State, remains a subject of debate.

Some brokers argue €12.75 is a fair offer for the group, while others believe it is worth €15 or more.

Meanwhile, further small scale selling by Bank of Ireland Asset Management (BIAM) has reduced its stake in the group to 9.81 per cent while Jupiter Asset Management announced yesterday that it held 3.03 per cent of the company.