Talk of bid for M&S sends its shares soaring
Jul 9 2008 by Peter McCusker, The Journal
TALK of a possible bid for Marks & Spencer sent shares in the struggling retailer soaring after recent steep falls as shareholders prepared to grill executive chairman Sir Stuart Rose later today.
M&S has been hammered since a shock profits warning last week, with around £1.7bn wiped off the value of the business.
But the firm rose as much as 7% yesterday 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 yesterday denied stakebuilding in M&S, had a £9.1bn 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. But 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, 6% of M&S’s stock was on loan yesterday.
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 at its annual meeting today.
