New surge in M and S shares amid bid speculation

Shares in Marks & Spencer surged 4% today amid speculation that a £10bn (€15bn) bidding battle for the retailer was set to break out.

Billionaire entrepreneur Philip Green announced plans to make a takeover approach yesterday which analysts said was likely to bring other bidders into the fray.

US-based retail giant Wal-Mart, which owns Asda, was named as a potential suitor after competition barriers forced it to withdraw from the race to take over supermarket chain Safeway.

Interest is also expected from private equity groups including Kohlberg Kravis Roberts, which has looked at retail assets in the UK and mulled a bid for Safeway last year.

Nick Bubb, of Evolution Beeson Gregory, said: “Wal-Mart is very much the dark horse.

“It’s got very deep pockets and could top any offer by Philip Green.”

In a statement to the stock market last night, M&S said it noted the announcement that Mr Green intended to bid and would respond when appropriate.

Analysts said it was unlikely that the M&S board would back a bid by the entrepreneur, who would then have to mount a hostile takeover or drop his interest in the group.

Mr Green has built a reputation as a successful retailer after speedily turning around the performances of Bhs and Arcadia, which includes fashion chains Miss Selfridge, Top Shop and Dorothy Perkins.

According to Dresdner Kleinwort Wasserstein, his strategy for M&S was likely to centre on selling property, financial services and its US retail assets.

This would raise at least £3.2bn (€4.8bn) and enable him to focus on the UK stores, the investment bank said.

Matthew McEachran, of stockbrokers Investec Securities, said: “There is substantial value locked up in the underlying assets and trading potential.”

Revealing his intentions yesterday, Mr Green said any offer would be made in the next few days through Revival Acquisitions, a company owned by Mr Green and members of his family.

The timing of the announcement came in the week that M&S said its sales recovery had faltered following fierce competition.

The group’s share of the clothing market declined by 0.2% to 11% last year despite increases in menswear, lingerie, women’s casualwear and the new per una womenswear label.

Shares climbed 15p (22.5c) to 360p (€5.40) today after rising more than 18% in a hectic end to the session yesterday.