Rumours of £8bn takeover bid pushed retailer’s shares to a 28-month high but sources have played down the speculation
Marks & Spencer shares hit a 28-month high on rumours of an £8bn takeover by the Qatar Investment Authority, reaching prices last seen in November 2010. Despite attempts by sources close to Qatar Holdings to play down the speculation, shares in the high-street business closed up nearly 7%.
However, neither M&S nor the Qataris issued a statement denying the rumours, and both could come under pressure from the stock market authorities to clarify their positions if the share price continues to rise.
The Qatar Investment Authority, of which Qatar Holdings is a subsidiary, already has significant interests in retailing. It has a 26% stake in Sainsbury’s, owns the department store Harrods, and has small shareholdings in the luxury brands Louis Vuitton and Tiffany & Co.
It is the latest takeover rumour for M&S, which is recovering from a difficult year that has included several boardroom shakeups.
Nick Bubb, a retail analyst, said: “M&S may have to say something, even if it is just to confirm that it has had no approaches. From a tactical perspective, we think that M&S is certainly vulnerable to a bid, as trading and profits are under pressure, with nothing to show yet for the big investments made in online systems and warehousing and the changes in the clothing team ahead of the key autumn season.”
The speculation stems from a Sunday Times report that the Gulf state’s sovereign wealth fund had approached several large private equity firms to gauge their interest and spoken to banks about financing an offer, citing senior City sources.
The shares rose throughout last week, and on Monday night closed up 6.9% at 398.1p, peaking at 407.1p in morning trading.
M&S could be attractive to the Qataris thanks to its £8bn property portfolio. It owns 65% of its stores. If the value is realised, a sale and leaseback programme could see any investor make a quick return, it was suggested.
However, many of the sites have been described as unattractive to landlords and the M&S pension fund holds £1.5bn of freeholds as part of a plan to reduce the pension deficit by £1bn in 2009.
Bubb added: “The question is what anybody thinks could be done with a declining brand like M&S.”
It is not the first time M&S has come under the scrutiny of a possible all-out takeover. Last summer, the US private equity group CVC Capital Partners was said to have eyed up a possible bid for the company, speaking to banks and investors to line up funding.
Some investors are beginning to lose faith in the ability of the chief executive, Marc Bolland, to revive the 128-year-old chain.
The retailer reported its first decline in profits for three years last May, followed by disastrous autumn sales due to stock problems and mismanagement. It led to the long-serving clothing supremo Kate Bostock leaving, and the former chief executive of Debenhams, Belinda Earl, coming in as a style director.
John Dixon, former head of food, has stepped in to become head of general merchandise, which includes its most important area: womenswear.
At its annual results, Bolland rowed back on a three-year plan to boost UK group sales by up to £2.5bn, and put the brakes on plans to open more stores.
Problems persisted and in January, David Cumming of Standard Life Investments, a top 10 shareholder in M&S, said Bolland had until September to turn around the company’s fortunes if he wanted to keep his job.
The last time M&S faced a possible takeover was in 2004, when Topshop owner Sir Philip Green made a second attempt to buy the business. However, it was thwarted by Sir Stuart Rose, who was brought in to steady the business and turn it around.