After massive falls, M&S shares rebound on talk of fresh bids

Published on Tuesday 8 July 2008 21:50

TALK of a possible bid for Marks & Spencer sent shares in the flagging retailer soaring yesterday after its recent steep falls.

M&S has been hammered since a shock profits warning last week, with some 1.7 billion wiped off the value of the business.

The market chatter comes as M&S braces itself for a rough ride at its annual shareholder meeting in London today, when chief executive Sir Stuart Rose is set to face opposition from shareholders over his election to executive chairman.

Despite a turbulent time for M&S, which last week warned the City it expected the current consumer downturn to be deeper and last longer than previously expected, shares closed almost 7 per cent higher on the rumours of possible takeover candidates.

The potential suitors include supermarket Sainsbury's, Delta Two – the Qatari fund which attempted to buy Sainsbury's last year – and billionaire retailer Sir Philip Green.

Green, who yesterday denied stakebuilding in M&S, had a 9bn offer for the firm snubbed in 2004, although some analysts speculated that a merger with Sainsbury's could be on the cards.

Panmure Gordon's Philip Dorgan, who lowered his target price on the group this week, said a deal with Sainsbury's "may come back on to the agenda".

But other experts suggested the share price rise could be down to "short-sellers" closing out their positions.

Short-selling is when investors borrow stock in order to sell it, hoping to buy it back later at a cheaper price and pocket the difference as profit.

Demand for the shares from short-sellers to return to their original owner would lift up the share price.