Two men and the fight that's set the City alight
Marks & Spencer stripped for action this week, countering a looming takeover bid by Philip Green by appointing Stuart Rose as chief executive. So how do the pair square up? Damian Reece reports
Wednesday 02 June 2004
Philip Green, 54, owner of Bhs and Arcadia retail groups
THE CONTENDER: Philip Green, 54, owner of Bhs and Arcadia retail groups
The barbarian at the gate?
Very much the barbarian if you are either Luc Vandevelde or Roger Holmes who were sacked as chairman and chief executive of M&S on Monday. They lost their jobs as Mr Green was rattling on the gates of M&S's headquarters, demanding to be let in with his plans for a takeover. Mr Green's reputation and style leaves nothing to the imagination. A non-stop swearing machine who jets in from Monaco to run his retail empire during the week, Mr Green is renowned for spotting a business in trouble, buying it cheap and restoring its fortunes. He has made himself the fastest retail billionaire in the process and this has all the ingredients of a real grudge match. This is the second time Mr Green has tried to buy M&S and he is not going to accept defeat this time.
However, even though last week's news of his planned approach to the M&S board sent the company's shares soaring, investors are paranoid about selling out too cheaply. After all, this is the man who bought Bhs for £200m only to see it valued two years later at £1bn.
Rags to riches or silver spoon?
Although the brash, estuarine accent and foul language suggest the roughest of upbringings, Mr Green actually enjoyed a relatively comfortable background. He was born in Croydon in 1952 and was sent to Carmel College, the independent school in leafy Berkshire. He excelled at sport, something of a surprise to people who have only ever come across him during his high-living business career. Few of those who attended his 50th birthday bash on a Greek island would guess Mr Green played cricket and squash at county level or that he captained the school cricket and football teams and it is those Bacchanalian half-century revels that people now remember. Guests had to wear gold trimmed togas and were treated to live entertainment from Tom Jones and Rod Stewart. It all cost about £5m for Green to lay on.
Comfortably off, then?
Yes, but like Mr Rose, his business success was born out of earlier tragedy. Mr Green was only 12 when his father died. The running of the property and electricals business was taken over by his mother. He got his first taste for business while helping his mother out during the school holidays but there is no doubt that the premature death of a parent for both men had a huge impact on the later drive for success during their business careers.
What's he done to deserve all the attention?
Well, the answer for stock-market shareholders is not a huge amount. His previous role as chairman of a public company ended in acrimony when he was forced out of a clothing company called Amber Day in 1992 after missing a profit forecast. The experience left a nasty taste and since then Mr Green has embarked on a series of swashbuckling deals to buy public companies and take them into private ownership.
He paid £850m for Arcadia in 2002 and has seen brands such as Top Shop enjoy a new lease of life. But his most spectacular success came with Bhs. Two years after buying it he had transformed the business. He is confident that he can repeat the success of his 2,000 strong retail empire at M&S which has just 380 shops.
Mr Green has made enormous successes of the companies he has bought from public ownership, enriching himself and his family as a result. However, one difference with Mr Green's plans for M&S is that he is offering the company's investors the chance to share in the fruits of his labours. His is offering them shares in his bidding vehicle which will be quoted on the stock market so, for once, other investors will be able to benefit from his talents.
Sounds like a miracle-worker
When it comes to business Mr Green does not leave much to luck. He prides himself on knowing every detail of the businesses he owns. He will walk the floors of his various stores in the early hours of the morning, pondering what stock is selling and what isn't. He is particularly sensitive about commentators who fail to acknowledge his abilities at improving the value of the businesses he runs. He suspects they dislike him because of his style. He is direct and ruthless. He has perfected the skills of a retailer over 25 years and knows exactly how to squeeze suppliers while maintaining the loyalty of certain wholesalers who operate closely with him. He is also scathing of managers who spend their time running public companies, with all the trappings of the establishment rather than getting on with the job of actually operating a business.
But is he the right man for M&S?
There are plenty of leading business people who have backed Mr Green in the past. His deals to buy Bhs and Arcadia have brought him into the sphere of establishment figures such as Allan Leighton, the chairman of the Royal Mail, famous for juggling several directorships at once. Mr Leighton is on the board of Bhs along with Robin Saunders, the feisty Texan banker who left WestLB, her city bank, in a blaze of publicity after the German-owned institution lost its appetite for her ambitious deal-making. But while Mr Green has plenty of supporters, the stock market is wary about his approach to running a public company. Unlike the urbane Mr Rose, Philip Green is an iconoclast who does not stand on ceremony.
Why has it taken him so long to launch his assault?
This is the second time that Mr Green has tried to buy M&S. His first attempt was in 1999 which was thwarted after M&S mounted a campaign to discredit his plans. The battle got very dirty, with details being leaked to the press of share dealings in M&S shares by Mr Green's wife. The ensuing flak persuaded Mr Green to retreat but he has been lying in wait ever since. Although M&S subsequently enjoyed something of a revival under Mr Vandevelde and Mr Holmes, it all proved a false dawn. Having earned widespread respect for what he had done at Bhs and Arcadia, Mr Green was in the perfect position to seek revenge.
And what will he do for the shareholders?
Possibly he has already done the biggest favour simply by revealing last week that he is serious about an M&S bid. The news sent the shares soaring 24 per cent in one day and they continued to rise yesterday. Mr Green is unlikely to want to pay too much more when he unveils details of his offer but if investors can stand his style, he may well be the man to restore M&S's lost fortunes.
THE DEFENDER: Stuart Rose, 55, chief executive of Marks & Spencer
Here comes the cavalry?
The bugle calls have been deafening at Marks & Spencer's headquarters since Stuart Rose's appointment as chief executive was announced on Monday evening. Merely naming him chief executive has added £50m to the company's £8.2bn stock market value. Shareholders are delighted. They are sure that the sharp-suited, smooth operator who talks a lot but says very little will either reverse the slump in M&S's fortunes and win the battle for control or make sure that Philip Green, the putative bidder, pays a very high price for control.
Rags to riches or silver spoon?
A bit of both really. Born 17 March, 1949, Mr Rose spent his childhood in Tanzania where his father worked for the overseas civil service. In his early teens he returned to England where he was sent to Bootham, the Quaker boarding school in York. His mother wanted him to be a doctor but despite taking his A-levels he clearly did not have the aptitude for medicine. He spent a £3,000 bequest from a family friend on fine food and smart clothes. Eventually he got himself taken on by M&S as a trainee manager at its Oxford branch. He was one of the few among the intake that year without a university education, something he has admitted left him a bit chippy.
Sounds all right to me
True, but like Philip Green he lost a parent at a crucial moment. After he joined M&S, his mother, a huge influence in his life, committed suicide. He was 24. She had imbued her son with a sense of style and her belief in his abilities inspired in him a self-confidence he never lost as a businessman. Her early death inspired an ambition that saw him rise from management trainee at M&S to Monday's announcement that he would be the company's new chief executive. In between he has acquired a reputation as one of Britain's foremost retailers and a shrewd wheeler-dealer.
The City obviously loves him. What's he done to deserve such a following?
If you've been a shareholder in his previous companies, you have done well. The most recent was Arcadia, the clothing chain, which he joined as chief executive in 2000 when the share price was 52p. He turned such tired fashion names as Top Shop, Top Man, Dorothy Perkins and Miss Selfridge into a group that wiped out debts of £257m while gross profit margins rocketed from 4.3 per cent to 51.5 per cent. What really excites M&S shareholders is the fact that Mr Rose and Mr Green are old adversaries. Mr Rose earned himself more than £25m from Arcadia share options when he forced Mr Green to pay 408p-a-share for Arcadia in a fiercely fought takeover battle in 2002. The deal was a 684 per cent return in little more than two years for investors who backed Mr Rose when he joined Arcadia.
Sounds impressive. But is it luck rather than judgement?
Luck has certainly favoured Mr Rose in recent years, but he gets very annoyed if his achievements are attributed to this alone. Certainly he has been in the right place at the right time for most of his career and his £1.25m golden hello and £850,000-a-year salary at M&S continues the trend.
He joined M&S in 1972, when the company was Britain's foremost retailer. By 1989 he was commercial director of the European division and had worked closely with the Sieff clan, including Israel, Teddy and Marcus. Looking for fresh challenges he left to join Burton Group as buying and merchandising director. There he fell under the influence of yet another legendary name in retail, Sir Ralph Halpern - the chairman much loved by the tabloids for his "five times a night" endeavours. After he had worked for the Dorothy Perkins, Evans and Debenhams fascias, Burton Group was split in two in 1997. Debenhams was floated off leaving Arcadia and its bunch of high-street brands as a stand-alone company. But Mr Rose did not get the top job at either company. John Hoerner was made chief executive of Arcadia, the job Mr Rose coveted. Snubbed, he left and joined Argos, the catalogue retailer, as chief executive.
It was a good move. He picked up £600,000 for being forced out of Arcadia and spent only three months at Argos before it succumbed to a takeover bid from GUS. Those three months earned him another £540,000.
From Argos he joined Booker, a relatively down-at-heel cash-and-carry business. Booker was sold to Iceland, the frozen-food retailer run by Malcolm Walker, for £325m. The deal triggered a £2.2m share-option package for Mr Rose but the boardroom proved too small for the two men and when the Arcadia job came up in November 2000, Mr Rose jumped at the chance to get back to fashion.
So he's got a track record. But doesn't M&S need more than another grey man in a grey suit?
Mr Rose is far from grey. He has developed a reputation as a real smoothie. His green eyes and good looks give him the air of a catalogue model himself. He has a dashing lifestyle that includes a love of fine wine and his own four-seater private plane. But he also genuinely loves fashion. He is a leading light in London Fashion Week and is close to all the cutting-edge designers. Although he is famed for his fast-talking management style, when taking decisions he has a clipped, concise way of dealing with issues and prefers to give his management teams the resources to get on with the job themselves. He is bringing several of his old Arcadia team with him and some M&S executives, notably Vittorio Radice, the former Selfridges boss now head of clothing at M&S, will be distinctly worried about their jobs.
So why has it taken him so long to come riding to the rescue?
Well, he's been armed to the teeth for at least 18 months, ever since Arcadia was taken over by Philip Green. He's just been biding his time, waiting for the inevitable demise of Luc Vandevelde and Roger Holmes, the chairman and chief executive, sacked on Monday.
And what will he do for the shareholders?
Well, they will get a retailer with a track record they can trust. He improved the operating performance of Arcadia, although Mr Green's takeover bid put a bit of polish on the returns. Ultimately shareholders are a mercenary bunch and with Mr Rose they have probably got the best man for the job. They are confident he can improve M&S's business performance but crucially he also has intimate knowledge of Mr Green's modus operandi. It could be a long fight.
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