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Aug 27, 2012
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Marks & Spencer bid talk boosts shares

Aug 27, 2012

Persistent bid rumours surrounding British clothing and food stores chain Marks & Spencer Plc pushed its shares up over 4 percent on Friday, as a media report added to speculation that private equity could be getting ready to swoop.

Photo: Marks & Spencer

CVC Capital Partners CVC.UL has already explored taking the company private, Bloomberg said, citing people close to the matter, but added that the firm is not thought to be currently pursuing a bid.

M&S shares closed up 3.9 percent at 370.5 pence, the biggest gainer and the most actively traded stock in the FTSE 100 index .FTSE, with several traders attributing the rise to the report. The stock hit a peak of 385.9p, its highest since March.

However, a source familiar with CVC's thinking said prospects of a deal happening remained uncertain. "If I were you, I would not spend too much time on this," the source told Reuters.

M&S shares have risen around 10 percent since the beginning of August amid reports of private equity or sovereign wealth fund interest.

In May the 128-year-old group posted its first drop in annual profits in three years, as even its relatively older and more affluent shoppers feel the chill of recession in Britain.

The company's strong brand could help make it a logical target for a leveraged buyout, said market watchers who closely follow M&S. Private equity firms like CVC, Advent, Lyons Capital and Bain have all looked at it, they said.

However, with a market capitalisation of around 5.7 billion pounds ($9 billion), any prospective buyer of the firm would need deep pockets at a time when the euro zone crisis means debt markets remain tight.

CVC would not be able to go it alone and would need to build a consortium of funds, a sector banker said, but may be shrewd to position itself now so as to be ready to make a move when funding conditions become more attractive.

Alternatively, a deal may come from across the Atlantic, with U.S. funds such as KKR and Carlyle having access to better funding than their European peers and looking for sizeable deals of this kind, said a London-based hedge fund manager.

A spokeswoman for Marks & Spencer said the company would not comment on rumour and speculation.

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