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Articles: M&S shares drop as Green walks

Posted by admin on Thursday, July 15, 2004 - 02:23 AM

Marks & Spencer shares have fallen as much as 9 percent after retail tycoon Philip Green abandoned his planned 9.1 billion pound bid for the high-street icon.
At 0815 GMT (9:15 a.m. British time) on Thursday, M&S shares were trading 5.4 percent lower at 346 pence after dropping as low as 330 pence as short-term investors hoping for a quick profit at Green's 400 pence-per-share offer price bailed out of the stock. Green, the billionaire owner of Bhs department stores and the Arcadia fashion group, abandoned his second campaign for M&S in four years on Wednesday night after Britain's biggest clothing retailer steadfastly refused to open its books to him. M&S said it was "pleased" a period of uncertainty had come to an end, and that the board had every confidence in its new team, led by experienced retailer Stuart Rose who embarked on Thursday on an intensive investor roadshow. Rose is aiming to reassure the firm's investors -- including M&S's top shareholders Brandes Investment Partners, which holds 11.7 percent of the stock. Brandes was among the third of the M&S shareholder base that wanted M&S to allow Green to perform due diligence, according to Green's bid vehicle Revival. "He'll be pressing on with his investor meetings, he absolutely needs to stabilise the shareholder base, and that will take quite some doing," a source close to the company told Reuters on Thursday. HOLD ON TO GAINS M&S shares stood at 290-1/4p before Green made his approach on May 27. But analysts did not expect the shares to give up all of their 25 percent rally as Green's six-week campaign had led to the arrival of retail expert Rose, and a turnaround plan. "From 350p downwards, we think there'll be demand from underweight institutions who will see the potential upside in the business. Our assessment is that the shares might be worth up to 500p over the next 12-18 months," said Matthew McEachran, analyst at Investec. Iain McDonald of Numis Securities said he believed Green was unlikely to come back in the near term, but said he'd done M&S shareholders a service by galvanising them into appointing Rose. Rose said on Monday he would return 2.3 billion pounds to investors in a share tender offer, sell the M&S Money financial arm and make annual cost cuts of 320 million pounds by 2006/7 to fend off Green's bid attempt and revive M&S's flagging fortunes. The cost of insuring against a debt default by M&S fell sharply on Thursday and its bonds rose in early dealings. Marks & Spencer's 2014 sterling bond rose a percentage point to be bid at 89.5 percent of face value, fading from initial highs of around 91 percent. "Bondholders can at least breathe a mini sigh of relief," said Stuart Trow, head of EU credit research at National Australia Bank, in a note to clients. Once the doyen of the British high street, Marks & Spencer has suffered falling sales and a declining market share amidst tough competition from rivals such as Next and supermarkets such as Asda and Tesco. But private shareholders at M&S's packed annual general meeting on Wednesday sided firmly with Rose and his turnaround strategy and the odds were stacked against Green, who many analysts said boxed himself in by declaring his hand too early and committing himself to not raising the bid.

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