Qataris' mooted takeover feeds M&S shares rally

Investors rallied to Marks & Spencer in early trading this morning as rumours about an £8bn takeover from the Qatar sovereign wealth fund intensified.

by Michael Northcott
Last Updated: 19 Aug 2013

The fact that the high street stalwart has been struggling to define its market in recent years did not stop investors getting seriously excited (this is no ordinary excitement, it’s M&S excitement) in early trading this morning. At their highest, shares were up 9% thanks to weekend rumours that Qatar is considering bidding for the chain.

The buzz is especially significant given that main stock markets across the world took a tumble this morning after news of the Cyprus bank bailout. The bid rumours are not new – it has been seen by some analysts as a takeover target for at least the last 12 months. But enthusiasm did not die even when subsequent murmurs emerged that the bid may not happen at all. Shares remained up 7.7% - lower than their peak, but still a top performer on the FTSE 100.

News of a possible takeover could be a boon to investors, who have heard nothing but bad news about the chain in recent months. Despite a substantial advertising campaign over the Christmas period, like-for-like UK sales in the 13 weeks to 29th December fell 1.8% on the same period the previous year. Look at the separate product lines, and the picture is even worse: food sales rose a meagre 0.3%, whilst general merchandise sales plunged 3.8%. In M&S's defence, CEO Marc Bolland has recharged his top team and is working through a turnaround plan, but the results of these efforts are still a few months away...

The Qatari sovereign wealth fund is keeping its powder very dry on the details of this bid, so these rumours have yet to be confirmed. But if such a sale does go ahead, it’s difficult to predict what the future will hold for the chain. In such a depressed retail market, and with disappointing results plaguing the business,it could be pretty tricky for M&S to defend itself against a determined bidder.

One thing’s for sure: shareholders stand to line their pockets rather handsomely if such a sale does go ahead…

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