M&S's soft rejection

8 July 2004 By Hugo Dixon

Although the UK retailer says Green’s 400p proposal undervalues it, it has left open the door for shareholders to take a different view. The soft rejection makes Green’s task harder. But this battle will still be determined by how good a defence M&S comes up with on Monday.

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The board of Marks & Spencer said Philip Green's final 400p a share proposal continues to undervalue the group and its prospects significantly. The UK retailer is convinced it can demonstrate this to its investors on Monday, when it will release its defence plan. It says shareholders will then be able to make an informed assessment of the board's view.

Meanwhile, the Financial Services Authority said it had ceased inquiries into share purchases by Stuart Rose, M&S's chief executive, shortly before Green revealed his interest in the company.

M&S pointed out that Green should clarify various aspects of his proposal. These include: the ownership of his bid vehicle and how it would be financed, the characteristics and value of his partial share alternative, how he would deal with competition issues and what due diligence he would need to do.

Green on Wednesday said that getting a recommendation from the board was a precondition to making a formal bid, and one that he would not waive.

Green's final offer is £680m more than his previous one. He told the FT that £475m of that would come from his family, taking its total commitment to £1.6bn. Goldman Sachs would put in another £50m, taking it to a total of £850m, and the balance would come from debt.

M&S's pension trustees on Wednesday warned Green that a riskier strategy for the business could cause them to demand significantly higher contributions.

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