Marks & Spencer leaps on spec­u­la­tion of $12bn bid

The Pak Banker - - COMPANIES/BOSS -

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.

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