The Irish Takeover Panel has given Grafton Group until August 6th to table an offer for its smaller rival Heiton Group. If it does not bid by that date, Grafton will not be able to approach Heiton for 12 months, the panel warned.

Grafton is reviewing its position with regard to Heiton, according to a spokesman. It follows the rejection in early June of a proposal from Grafton that would have seen it bid €6.35 per share or €325 million.

It said yesterday that it has not determined its position in relation to any possible offer for Heiton.

"As stated in Grafton's announcement of June 17th, there can be no certainty that any offer will ultimately be made," said the spokesman.

Grafton is unlikely to table a bid until there is clarity concerning Heiton's bid for Brooks, another building supplies business. Brooks, which has around 6 per cent of the Irish market, has been put up for sale by its Finnish parent. The sale process is being managed by Morgan Stanley in London. The bank refused to comment yesterday on reports that the process had reached the stage of exclusive negotiations and that UK group Wolseley was the preferred bidder.

Heiton sources said yesterday that it had received no formal indication that Morgan Stanley was in exclusive negotiations with another party. If Heiton was ruled out of the race for Brooks, its ability to resist Grafton's approaches would be significantly weakened. The rationale for the merger of the two biggest players would be enhanced if Wolseley was to emerge as the new owner of Brooks.

Heiton shares fell 27 cent to close at €6.20 last night. Grafton sources said that its initial approach of €6.35 included the annual dividend of 10 cent, which has now been paid. The source said that Grafton's "offer" was now €6.25, but market sources believe that Grafton could offer significantly more for its rival.

The combined group would have around 19 per cent of the market.