M&S under the limelight
Monday, 03 September 2012
Mark & Spencer has stolen the limelight in the past week under alleged talks for a possible takeover. Since the 24th of August, M&S´s stock has rocketed in a matter of weeks from a year low of 316p to top 370p last week. According to a
Bloomberg report on Friday (24 August), private equity firm CVC Capital Partners has been exploring the possibility of taking M&S private, having approached executives about a possible management role under its control.As
reported by ‘This is Money’, M&S is now trading on a price earnings ratio of 11.1 times up from 9.8 times six weeks ago, when the firm reported weak first-quarter sales.Despite neither Mark & Spencer, nor CVC Capital have wanted to comment on the rumour, the mere possibility implying the British beloved retailer to be taken private, has got the industry talking.
Singer Capital Markets analyst Matthew McEachran reminded last week how M&S "has been a takeover target before...but whether the metrics actually work is another question. Ultimately, if there were a bid for M&S, you can guarantee you'd be looking at the valuation today in terms of a takeover, so that means putting in place the funding, what's the debt to equity split, etc., etc.”
"Whilst we do not know if anything will emerge, if it did then M&S should command a material premium to the present share price to our minds," Shore Capital analyst Clive Black notes.
"M&S is a highly-prized and leading brand in UK retailing with a strong international resonance and potential. "The group has a strong balance sheet with commendable fixed assets and manageable solvency ratios that should materially improve once the investment is complete; those future cash flows should not be overlooked by shareholders," Black concludes.
In the same vein, a “successful bid is highly unlikely for M&S,” said to Reuters Bethany Hocking, an analyst at Investec Securities, who has a ‘sell’ recommendation said. “It would require a very large equity raising; the pension fund and trustees could represent a significant barrier; and although Marks has property, it is predominantly high-street stores.”
Up to date, Marks & Spencer’s market value is 5.7 billion-pound and reported its first profit drop in three years in May.
