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Sunday, 12 December, 1999, 11:01 GMT
Tesco 'follows up M&S interest'

Marks & Spencer shop front

Supermarket chain Tesco has recruited an investment bank to lead any bid for fellow retailer Marks & Spencer (M&S), according to the UK's Sunday Business newspaper.

If Tesco decided to go ahead, a bid would not be expected until the New Year, the newspaper says.

But Credit Suisse First Boston has already been chosen to head what would be likely to be a hard fought battle.

M&S full year profits M&S profits fell sharply this year

The newspaper also says that the Takeover Panel contacted Tesco last week to query its intentions as M&S's shares surged on Friday.

There was no statement from Tesco, merely one from the Marks & Spencer board, to the effect that it knew of no reason why its shares had risen 17% during the day.

Rival bidders

In general, when word leaks out about takeover negotiations, one or other parties is forced to make a statement to the City about its intentions.

The fact that none was forthcoming adds some credibility to the Observer newspaper's assertion that there is no imminent bid from Tesco for M&S.

Shares in the UK's largest clothing retailer will be under the microscope on Monday morning after the frenetic trading sparked by a wide variety of takeover rumours.

Almost 100 millions M&S shares changed hands during Friday, with the shares closing up 17% - which added more than 1bn to the company's value.

The movement was so dramatic that the company had to issue the statement to the London Stock Exchange saying it knew of no reason for the rise.

M&S half year profits Half year profits show the fall

Analysts and sector watchers have been getting increasingly enthusiastic about the chances of Marks & Spencer becoming a takeover target.

Suggested rival bidders include Knutsford, the company fronted by the former Asda boss Archie Norman and Woolworth's owner Kingfisher.

The share price of M&S has slumped for most of this year because of its poor performance with sales and profits falling.

Competition doubt

The share price has more than halved in little more than two years as its well chronicled difficulties have removed some of the gloss which made it one of the UK's most admired companies.

Its shares, which last week closed at 239p, have risen during the week to 300.75p after a 38p jump on Friday.

The rise in the share price increased the company's value by more than 1bn from 7.5bn at Thursday's close of business.

Sunday Business says that the advisers believe an offer of 380p a share was needed to succeed, but at that price there may not be much short term benefit for Tesco.

The bid issue is also complicated by the on-going Competition Commission inquiry into pricing in the supermarket industry in the UK.

Tesco is the largest UK supermarket, and M&S is the country's sixth largest food retailer.

Meanwhile Phillip Green was reportedly preparing to launch a major retail takeover less than a year after completing his break-up bid for Sears.

Mr Green had shortlisted six potential bid targets including M&S, Arcadia, New Look and Storehouse, the Sunday Telegraph said.

A spokesman for Tesco declined to comment on the reports on Sunday, while M&S reiterated its statement that it was not in takeover talks.

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See also:
02 Nov 99 |  The Company File
Marks fights back against slump
27 Sep 99 |  The Company File
M&S reports fresh sales slump
29 Nov 99 |  Business
Unions protest against M&S job cuts

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