M&S stirs up Sainsbury's bid talk

Marks & Spencer’s admission of interest in a potential bid for Sainsbury’s could press the retailer’s private equity suitors into tabling a firm offer for the company, a leading retail analyst said today.

M&S said it had considered a bid for Sainsbury’s but decided not to make an offer, dampening speculation after chief executive Stuart Rose told a conference that the idea of a bid was “interesting”.

A private equity trio of Kohlberg Kravis Roberts, CVC and Blackstone said they were considering a bid for Sainsbury’s nearly four weeks ago but no definite offer – expected around the 550p a share mark – has been forthcoming.

Shares in Sainsbury’s were up more than 2.5% today.

Nick Bubb, head of general and food retail research at analyst Pali International said: “Stuart Rose has said things before and got into trouble for it, but it shows that M&S have been looking at it seriously – perhaps more seriously than some of us thought.

“The shares could be up because it forces the private consortium to get on with it, as it has been around a month since they made their original announcement.”

Under takeover rules, M&S is now barred from making a bid for Sainsbury’s in the next six months. However, M&S can still make an offer if the private equity team puts in a definite bid or there is a recommendation from Sainsbury’s board.

Other watchers said the M&S statement lifted the Sainsbury’s shares because it did not shut the door on a potential bid.

Seymour Pierce analyst Richard Ratner said: “Investors may think there is a white knight in M&S still in the wings. The statement said it would not bid ”at this time“ so a bid is not totally ruled out.”

Numis analyst Steve Davies added: “The M&S statement does not close off many - if any – of their options. It prevents them from making a hostile bid – which was highly unlikely anyway – but it does show that private equity might not have it all their own way.”

Marks & Spencer shares were up 5.5p at 680.5p today following the statement as analysts have concerns over a potential Sainsbury’s bid.

Philip Dorgan, analyst at Panmure Gordon, said that any M&S deal for Sainsbury’s would “end in tears” and has a ’sell’ rating on the stock.

He said: “We can only think of four problems – cultural risk, financial risk, people risk and operational risk.”