M&S shares soar amid bid talk

Talk of a possible bid for Marks & Spencer sent shares in the struggling retailer soaring today after its recent steep falls.

M&S has been hammered since a shock profits warning last week, with around £1.7bn (€2.1bn) wiped off the value of the business.

However, the firm rose as much as 7% to the top of FTSE 100 Index after rumours of possible takeover candidates including supermarket Sainsbury’s, Delta Two – the Qatari fund which attempted to buy Sainsbury’s last year – and billionaire retailer Sir Philip Green.

Sir Philip, who denied stakebuilding in M&S today, had a £9.1bn (€11.4bn) offer for the firm snubbed in 2004, although some analysts speculated that a merger with Sainsbury’s could be on the cards.

Panmure Gordon’s Philip Dorgan, who lowered his target price on the group this week, said a deal with Sainsbury’s “may come back on to the agenda”.

However, other experts suggested the share price rise could be down to “short-sellers” closing out their positions.

Short-selling is when investors borrow stock in order to sell it, hoping to buy it back later at a cheaper price and pocket the difference as profit.

According to Data Explorers, which monitors “short” positions in the market, more than 7% of M&S’s stock was on loan last Thursday, but this had fallen to 6% today.

Demand for the shares from short-sellers to return to their original owner would lift up the share price.

The rise in M&S’s shares helped lift other retailers who have been hit by the squeeze on consumer spending.

Fashion retailer Next gained 2%, while in the FTSE 250, Currys and PC World owner DSG International advanced 5%. There were also rises for Carpetright, HMV and Sports World owner Sports Direct International.

Last week M&S unveiled an overall 5.3% fall in UK like-for-like sales in the 13 weeks to June 28 – the worst quarter for the company since April to June 2005.

The group, led by executive chairman Sir Stuart Rose, faces a rough ride from shareholders at its annual meeting tomorrow.