Shares in Marks & Spencer surged today on speculation that the high street retailer is an £8 billion bid target for Middle Eastern investors.
The stock jumped 8% at one stage, adding more than £500 million in value, after The Sunday Times said the Qatar Investment Authority (QIA), the Gulf state’s sovereign wealth fund, is in talks with private equity and banks about an approach.
Despite the scale of the share price movement, there was no official stock market announcement to confirm or deny the speculation.
A bid for the retailer would mark the biggest private equity takeover of a British blue chip firm since Alliance Boots was snapped up by US buyout firm KKR for £11 billion in 2007.
It would also see another British name fall into foreign hands after recent high-profile takeovers such as US group Kraft’s controversial acquisition of Cadbury.
M&S is often the subject of takeover speculation and there are significant hurdles for any such deal to get the go ahead. Aside from the price tag needed to win over management and investors, M&S has a hefty pension deficit of about £300 million which means the scheme’s trustees have a significant say in any deal.
Other bidders have tried and failed to bag M&S in the past, with BHS and Topshop tycoon Sir Philip Green launching an unsuccessful hostile £10 billion bid in 2004.
Private equity firm CVC, which owns Formula One, is said to have considered a bid for M&S last summer but pulled out after its plans were made public.
The takeover spotlight has once more fallen on M&S with its faltering sales in recent years.
Chief executive Marc Bolland is leading a turnaround plan to revive its performance but progress is slow because of difficult high street conditions.
It reported its first fall in profits for three years in 2012 and followed this with a dismal performance in clothing over Christmas. Overall like-for-like sales in the UK fell 1.8% in the 13 weeks to December 29 after a bigger-than-expected 3.8% slump in general merchandise.
Mr Bolland is hoping a new clothing management team, which includes ex-Jaeger boss Belinda Earl, will start to deliver when their first collections hit the shops in July.
But M&S shares have taken a hammering, down 70% in the last year alone, making the firm an attractive takeover target.
QIA is no stranger to the UK retail sector. Its Qatar Holding subsidiary bought Harrods three years ago for £1.5 billion and it has a 25% stake in supermarket Sainsbury’s. It also has the financial firepower for such a deal, although it is believed to be keen to tie up with private equity funds to reduce its risk.
Retail analyst Nick Bubb said: “M&S is certainly vulnerable to a bid, as trading and profits are under pressure, with nothing to show yet for big investments made in online and warehousing and the changes in the clothing team ahead of the key autumn season.”