POTENTIAL BIDDER FUELS RUMORS MARKS & SPENCER IS UP FOR SALE
Byline: James Fallon
LONDON — Marks & Spencer PLC, owner of Brooks Brothers, continued to be the subject of takeover rumors Monday as at least one potential bidder admitted he was eyeing the struggling British retailer.
Philip Green, a British entrepreneur who has earned a fortune from buying and dismantling struggling U.K. retailers, confirmed to the U.K. Takeover Panel that he has appointed Donaldson Lufkin & Jenrette to examine the possibility of a takeover of Marks & Spencer. However, Green stressed in a statement that it was too early to say whether the study would lead to any offer.
Meanwhile, Tesco plc, the U.K.’s leading food retailer — also mentioned as a possible bidder — said it has no plans to make an offer for Marks & Spencer.
The rumors were stirred by a sharp rise Friday in Marks & Spencer’s share price, which soared 14 percent to close on the London Stock Exchange at $4.86. The shares leaped by another 10 percent Monday before losing all their previous gains to close down 8.7 percent at $4.55 after the statements by Green and Tesco dampened takeover speculation. Dollar figures are converted from the English pound at current exchange.
Retailers, including Hennes & Mauritz and Kingfisher PLC, the investment group Knutsford and even French group Pinault-Printemps-Redoute also have been mentioned as possible bidders for Marks & Spencer. However, several of these companies said they have no interest in bidding for the company, while PPR and Kingfisher said they never comment on market rumors.
Marks & Spencer has been struggling for the last 18 months with a top-heavy management structure, outdated sourcing practices, high prices and poor consumer reaction to its fashion collections.
Marks & Spencer — in common with other mainstream British retailers — also faces the specter of increased competition from such foreign retailers as Wal-Mart — which acquired the U.K.’s Asda PLC this summer — Hennes & Mauritz and Zara.
New management, headed by chief executive Peter Salsbury, took over at Marks & Spencer in February and has been moving to trim its layers of management and speed its sourcing while at the same time lowering prices by switching more to overseas manufacturers.
But analysts expect Marks & Spencer to admit it has had a poor Christmas season when it issues its trading statement in early January.
The difficulty for any buyer of the company would be how it could turn the chain around any faster than the current management. Marks & Spencer has few assets apart from Brooks Brothers that could be sold off and analysts admit that Brooks Brothers couldn’t be sold at a profit, given the high price Marks & Spencer paid in the Eighties. That means any new owner would have to focus on a nuts-and-bolts turnaround of the chain, which would take some time. As a result, some analysts questioned why any company would want to buy Marks & Spencer at this stage, before the turnaround has begun.