Marks & Spencer: ‘retail theatre’

There was appreciation in the City for the ‘virtual bid’ made by Philip Green and friends for Marks & Spencer (M&S). Being a virtual bid meant that no bid was made at all but Mr Green had said that he was thinking about a bid and, given the magical powers of money, that was enough to make a lot of people a lot of money – hence the appreciation.

Poor trading figures released in early April stirred murmuring in the City: heads might roll. Mr Green, owner of Arcadia (Top Shop and Dorothy Perkins) and Bhs, marshalled his troops. Among these was Stuart Rose, ‘a long and close acquaintance of Mr Green’s’. Mr Rose was a former chief executive of Arcadia, Argos and Booker. Mr Rose quickly snapped up 100,000 M&S shares. M&S acting chair Paul Myners (formerly of the Daily Telegraph, Rothschild, National Westminster Bank, PowerGen and much else besides) had other plans for Mr Rose and on 31 May announced Mr Rose as the new M&S chief executive. Understandably aggrieved at this gross disloyalty Mr Green seized Mr Rose’s lapels outside M&S’s Baker Street headquarters and amid expletives told him that ‘I could have made you £250 million if you had stayed with me – I could have made you so rich’. No doubt true, but Mr Rose is already very rich. The spat over and no hard feelings, Mr Rose offered to take Mr Green to Harry’s Bar for dinner.

On 3 June Mr Green declared his virtual bid with a virtual offer of 290p to 310p a share, later raised to 400p. Matters between Mr Green and Mr Rose did not improve. Indeed, a sinister undertow crept between the ‘long and close acquaintances’. Mr Green rang Mr Rose up to sing ‘If you go down to the woods today, you’d better go in disguise,’ and other lines from Teddy Bears’ Picnic. Mr Rose suspected his mobile phone records had been stolen and that someone was interfering with his wife’s mail, chiefly bank statements. Using the Data Protection Act, Mr Rose asked that Mr Green disclose any information he was holding on him. For whatever reason, Mr Green told his bodyguard to go out to Marylebone Road, near his Bhs office, and collect prostitutes’ cards and deliver them to Mr Rose with a note attached: ‘Dear Stuart, please find enclosed the information that I have on you. Here’s a picture of the two girls that had dinner with you at Harry’s Bar a few weeks ago. I enclose the £10 which they told me to return to you. Philip.’ Mr Rose said this was ‘very Philip’.

Readers might find this a bit comical, but amid the virtual bidding were some moments of genuine artistry as M&S share prices rose from 260p to 360p. In March Mr Green told friends that he was lining up M&S for a takeover; these friends had friends who no doubt also had friends. Two examples of the money-makers’ art will have to suffice. The Reuben brothers, like Mr Green, live in Monaco where the tax climate is favourable. Upon news of the impending virtual bid they bought 760,000 M&S shares. A few days later they visited their bank BNP Paribas and told them of their own plan to take over M&S. News, of course, travels. They paid 6p each for share options and sold them later for 63-64p, making £437,000 profit and well worth the trip to the bank.

Michael Spencer, owner of Icap, the world’s biggest inter-dealer broker, is, like Mr Rose, a director of Image Restaurants, including such illustrious venues as The Avenue. They met, naturally enough, for a drink at a London club to discuss Image Restaurants. The next day Spencer bought £5.5 million worth of M&S shares. This perspicacity and ability to read the markets is a skill Michael Spencer, like many of Mr Rose and Mr Green’s friends, has in abundance. One needs to know that insider dealing is a crime and not something these gentlemen would entertain.

Far from it, Mr Green and Mr Rose maintain some of the finest company in the land. In the Green corner were Goldman Sachs, Merrill Lynch, Barclays Bank, HBOS bank and the Royal Bank of Scotland, who together offered a virtual £7.5 billion for the imaginary bid. Mr Green’s prospects looked up when he recruited Lord Stevenson to his team: ‘a very smart move – no one is better connected’. Lord Stevenson is chair of HBOS and of Pearson, publisher of the Financial Times and The Economist, and chair of the House of Lords Appointments Committee. In the Rose corner were Citigroup, Morgan Stanley, Cazenove and M&S’s banker for the past 100 years, HSBC. In the end it seems to have been the sober judgment of Standard Life and Legal and General that tipped the balance in Mr Rose’s favour. Although to have the world’s number one and number two banks on your side does help when real and unreal money is involved.

Sadly, there were casualties, but then in competitive markets there must be and all to the good. M&S directors Luc Vandevelde, Roger Holmes, Stella Rimington and Vittorio Radice left to boost the confidence of the markets, but their departures are softened by £15 million in pay offs. The removal of the ‘flamboyant’ Vittorio Radice may suggest what lies in store for M&S as it seeks to recapture it stolid middle class, middle England customers. Formerly a director of Habitat and Selfridges it is Radice who coined the notion of ‘retail theatre’ where shopping will be as entertaining as watching a film or football.

However, new blood there is in the form Anthony Habgood, also currently or previously a director of National Westminster Bank, Tootal, PowerGen, Geest and Bunzl, and Steven Holliday, chief executive of National Grid and National Grid Transco, qualifications well suited for clothing and food retail for sure.

In the end, after six weeks excitement, it was probably Mr Rose’s strategic plan that won the day against Mr Green. ‘Less is more’ was the watchword. Less on offer to customers, squeeze suppliers, reduce mark-downs, close down stores, cut staff and fuel bills and save on plastic bags: marvellous stuff! Mr Rose also proposed to sell the M&S credit card, loans and insurance business to HSBC for $763 million and, together with a little help from the banks, give shareholders £2.3 billion in September. Mr Rose arranged for a revaluation of M&S properties which duly added £3 billion to their worth so that M&S can borrow more and keep the shareholders satisfied. Mr Green took his virtual bid away saying, ‘I don’t want to spend £12.5 billion and have a heart attack. We’ve been treated shabbily.’ He did sound an optimistic note, saying that he reserved the right to come back with another bid in six months and for many in the City, in London clubs, Harry’s Bar, and Monaco those six months cannot come soon enough.

Now you must ask yourself whether you have got what it takes to be a multi-millionaire – and whether you want to shop at M&S. m

Trevor Rayne

Other reasons not to shop at M&S

M&S is the number one British corporate backer of Israel and Zionism and has been for many years. Of 13 high street and DIY chains Greenpeace branded M&S the worst offender for selling furniture made from wood from the most endangered areas of the planet. M&S wood is destroying the habitat of orang-utans and Sumatran tigers. Winner of the Company of the Year from Business in the Community for being a ‘responsible employer’, many M&S branches are hostile to trade union membership among their employees.

FRFI 180 August / September 2004


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