Marks & Spencer Leaps on Speculation of $12 Billion QIA Bid

Marks & Spencer Group Plc (MKS), the U.K.’s largest clothing retailer, rose the most in almost four years in London trading on speculation that the Qatar Investment Authority is considering an 8 billion-pound ($12 billion) offer.

The shares advanced as much as 9.4 percent to 407.4 pence, the steepest intraday gain since March 31, 2009. They were up 7.5 percent as of 10:26 a.m., paring gains after a person close to the sovereign wealth fund said it wasn’t considering a bid.

QIA has approached banks and private equity houses, including CVC Capital Partners, to assemble a group to make a move on the London-based retailer, the Sunday Times reported yesterday, citing senior sources in London’s financial district. No approach has yet been made, the newspaper said.

Marks & Spencer declined to comment.

Today’s share price rise took the stock above billionaire Philip Green’s 400 pence-a-share takeover attempt in 2004. Marks & Spencer in January reported a decline in quarterly clothing sales as Chief Executive Officer Marc Bolland struggles to win shoppers almost three years after succeeding Stuart Rose.

“It is an understandable time for any suitors to consider an approach for M&S because in all likelihood if the U.K. clothing performance does improve and cash flows through in due course then the share price should be much higher anyhow,” Clive Black, an analyst at Shore Capital, said in a note.

Sainsbury, Harrods

A purchase would add to Qatar’s U.K. retail investments that include a 26 percent stake in J Sainsbury Plc, (SBRY) the U.K.’s third-largest supermarket chain. The Gulf country also bought luxury department-store Harrods for 1.5 billion pounds in 2010.

The speculation regarding Marks & Spencer may increase “bid noise” on Sainsbury, Andrew Gwynn, an analyst at Exane BNP Paribas said in a note, though the food retailer’s pension fund deficit “is a major stumbling block.”

Sainsbury shares rose 0.7 percent to 365.4 pence as of 10:26 a.m.

A buyer of Marks & Spencer could sell property, cut costs and reduce capital spending, according to Exane BNP Paribas.

Espirito Santo analysts estimate that about 65 percent of the retailer’s 21 million square feet (1.95 million square meters) of selling space is freehold and that its real estate could be worth as much as 8 billion pounds.

Still, selling and leasing back property may be difficult as Marks & Spencer reduces the size of its stores and shoppers spend more online, analyst Caroline Gulliver said.

An offer is “unlikely,” according to Cantor Fitzgerald Europe analyst Freddie George, though with equity markets close to record highs, speculation is likely to persist, he said.

The cost of insuring Marks & Spencer’s debt against default surged as much as 36 basis points, the most since May 2008.

To contact the reporter on this story: Paul Jarvis in London at pjarvis@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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