The bidding war for Goody's Family Clothing Inc. escalated Monday with the retailers' directors saying the buyout proposal of two New York investment firms is superior to one the company has tentatively accepted.

Prentice Capital Management and GMM Capital have made a cash offer of $8.85 a share, or about $302 million, for the Knoxville-based clothing chain.

The bid would exceed an $8-a-share offer made by Boca Raton, Fla.-based Sun Capital Partners that Goody's tentatively accepted Oct. 7, and it would match a competing proposal received a week ago from an unnamed third party.

The competition already has prompted three shareholder lawsuits against Goody's, alleging the Sun Capital bid undervalued the company. Goody's said it remained open to additional offers.

Shares of Goody's, which operates 371 stores mostly in the South and Midwest, rose 14 cents, or 1.6 percent, to $8.96 in midday trading on the Nasdaq Stock Market.

In a statement Monday, Goody's said it was giving Sun Capital four days' notice that it will terminate its deal "on the basis of its receipt of a superior proposal" from Prentice Capital and GMM Capital.

Prentice Capital and GMM Capital, which together own about 6 percent of company's shares, have raised their bid three times for Goody's.

But the bidding may not be over. Goody's said talks were "ongoing" with the undisclosed third party, which also made an $8.85-per-share offer a week ago.

Goody's said Prentice Capital and GMM Capital agreed to hold open their offer until midnight Thursday or until the Sun Capital deal is terminated.

"Another bidder could also submit a competing offer during" that time, the company said.

Prentice Capital Management recently acquired KB Toys Inc., the financially troubled Massachusetts-based toy store chain, and provided restructuring financing to Whitehall Jewellers Inc. of Chicago. GMM Capital is a fund controlled by Israeli apparel industry executive Isaac Dabah, former owner of Gloria Vanderbilt jeans.

Goody's began operations in 1953 in Athens, Tenn., as Athens Outlet Store. Robert Goodfriend, son of the store's founder, became president and chief executive in 1972. He renamed it Goody's after the family aggressively expanded the company and took it public in 1991.

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