Marks & Spencer leaps on speculation of $12bn bid
Marks & Spencer Group Plc (MKS), the U.K.'s largest clothing retailer, rose the most in almost four years in London trading on speculation that the Qatar Investment Authority is considering an 8 billion-pound ($12 billion) offer.
The shares advanced as much as 9.4 percent to 407.4 pence, the steepest intraday gain since March 31, 2009. They were up 7.5 percent as of 10:26 a.m., paring gains after a person close to the sovereign wealth fund said it wasn't considering a bid. Customers enter and exit a Marks & Spencer Group Plc store in Chester. Photographer: Paul Thomas/Bloomberg
QIA has approached banks and private equity houses, including CVC Capital Partners, to assemble a group to make a move on the Londonbased retailer, the Sunday Times reported yesterday, citing senior sources in London's financial district. No approach has yet been made, the newspaper said.
Today's share price rise took the stock above billionaire Philip Green's 400 pence-ashare takeover attempt in 2004. Marks & Spencer in January reported a decline in quarterly clothing sales as Chief Executive Officer Marc Bolland struggles to win shoppers almost three years after succeeding Stuart Rose.
"It is an understandable time for any suitors to consider an approach for M&S because in all likelihood if the U.K. clothing performance does improve and cash flows through in due course then the share price should be much higher anyhow," Clive Black, an analyst at Shore Capital, said in a note.
A purchase would add to Qatar's U.K. retail investments that include a 26 percent stake in J Sainsbury Plc, (SBRY) the U.K.'s third-largest supermarket chain. The Gulf country also bought luxury department-store Harrods for 1.5 billion pounds in 2010.
The speculation regarding Marks & Spencer may increase "bid noise" on Sainsbury, Andrew Gwynn, an analyst at Exane BNP Paribas said in a note, though the food retailer's pension fund deficit "is a major stumbling block."
A buyer of Marks & Spencer could sell property, cut costs and reduce capital spending, according to Exane BNP Paribas. Espirito Santo analysts estimate that about 65 percent of the retailer's 21 million square feet (1.95 million square meters) of selling space is freehold and that its real estate could be worth as much as 8 billion pounds.