Speculation surrounding a potential bid for high street retailer Marks and Spencer (M&S) is fuelling strong shares in the company, according to an analyst’s comments today.
Shore Capital analyst Clive Black has welcomed media speculation that the retailer is the subject of corporate interest from private equity firm CVC, recommending buying shares in the business during this period.
Bloomberg reported last week that CVC has explored the possibility of a bid for the company, though Black noted that a lack of official response from M&S suggests that no formal approach has been made, adding: “What is more clear to us is that M&S’ share price has been supported by these stories and there are questions about whether there is an orderly market or not in the stock at this juncture.”
Despite struggles across its general merchandise ranges, Black highlighted a strong performance across its food business, Childrenswear and Menswear ranges as well as across its e-commerce channels, though added “the pace of activity concerns us.”
Tomorrow, M&S is to open its flagship store in Cheshire Oaks, a 148,000 sq ft offering which is second in scale only to its Marble Arch store and presents management’s increased interest in Beauty and Home.
Commenting on the retailers’ position, Black added: “In response to the recent corporate activity stories we have stated that 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.
“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.
“We repeat that shareholders should be careful about at what price they allow another management team to harvest the rewards of this work. Whilst noting the mark up, which provides lesser immediate upside, we retain our positive stance for now.
“With respect to CVC and bids we anticipate a straight bat approach from M&S and will watch with interest to see how matters pan out.”