Qatar denies plans to take over M&SDUBAI/LONDON: Marks & Spencer shares surged yesterday on speculation that a faltering turnaround effort and flagging profits have left Britain’s biggest clothing retailer vulnerable to a takeover.
Investors piled into the stock after a newspaper reported that Qatar was planning a bid, sending the shares up 9.4 percent to a 12-month high.
A source close to state-owned Qatar Holding denied the report, but the stock was still up 7.4 percent at 1130 GMT. Analysts and investors said Marks & Spencer (M&S) could be a target for a private equity firm.
The company, which also sells homewares and food, traded poorly in 2012 and in January reported a bigger-than-expected drop in non-food like-for-like sales for the Christmas quarter.
“M&S is 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,” said independent retail analyst Nick Bubb.
M&S declined to comment.
Marc Bolland, chief executive since 2010, has said he was confident steps being taken by a new general merchandise management team, led by former food boss John Dixon, would address the poor recent performance, although the impact would not be felt until autumn/winter collections hit the shops in July.
M&S investors such as Standard Life, which holds 1.5 percent of the company, have said Bolland has to get this range right to placate shareholders.
Although one senior retail banker gave the probability of a takeover at just 5 percent, some analysts said a recent improvement in the debt markets and the amount of cash currently in private equity meant a bid could happen.
“You could argue that the business could support quite a bit of debt if it wasn’t having to pay a dividend, making a private equity-style bid possible, but the trading outlook looks rather uncertain,” one of M&S’s top 20 shareholders said.
The Sunday Times newspaper had said the Qatar Investment Authority (QIA) wanted to assemble a consortium to mount an £8bn ($12.1bn) takeover.
The newspaper cited senior City of London sources as saying Qatar, which is already a 26 percent shareholder in Britain’s No. 3 grocer J Sainsbury, had approached several large private equity houses, including CVC Capital Partners, to gauge their interest in participating, and had spoken to lenders about financing an offer. CVC declined to comment.
A source close to the fund said QIA, the investment arm of the state’s sovereign wealth fund, was not considering a bid.
With an investment appetite of about $30bn every year, Qatar has emerged as one of the world’s most aggressive investors, piling on stakes in companies ranging from top-tier banks such as Credit Suisse to carmaker Porsche and miner Xstrata.
The sovereign fund’s investments are widely seen as opportunistic, not following a specific strategy, as it has purchased a wide range of assets globally. It likes to engage in bilateral discussions with the seller and generally does not invest in a consortium.
Shares in M&S were up 27.5 pence at 400 pence at 1130 GMT, valuing the business at 6.45 billion pounds. However, its bonds weakened sharply and the cost of protecting its debt against default rose. Reuters
