Business view: A bit of a flap around a former favourite
Sunday 12 December 1999
M&S said that it knew of no reason for the price movement, and I am inclined to believe it. But there are flurries of rumours.
The first I can kill off immediately. Tesco is not about to launch a hostile bid. Given that the Competition Commission is crawling all over supermarket pricing it would be monumental stupidity on the part of Terry Leahy to make a bid in the UK. Anyway, he is opening the equivalent of a William Morrison a year, on the continent, so he can see where his growth is coming from.
Kingfisher is also an unlikely bidder, though it might like to buy M&S. For Knutsford, there is not enough opportunity to finesse M&S's property to make it attractive. The other rumoured bidder - perhaps the one I am most inclined to believe - is Royal Ahold. But then again this Dutch group is rumoured to be a bidder for anything (remember, indeed, the Sainsbury speculation last year).
I suspect, though, that if Ahold (or KKR or Pinault Printemps Redout) did bid this could tempt Tesco or Kingfisher into a rival offer to protect their home territory. However, a NatWest-type bidding for M&S appears a long way away.
The other rumour is that M&S is about to appoint a new chairman, so ending half a year of speculation. However, I do not think we will hear any news of that this side of Christmas, and I cannot imagine an appointment so good it would add 14 per cent to the share price. The best candidate, Archie Norman, would lead to a fall in the share price as it would take away bid speculation. So, I am afraid that the only conclusion I can come to is that M&S is about to reinvent itself as an internet company, appointing a 25-year-old as the chief executive elect. StMichael.com anyone?
Deals in the air
Maybe it's the annual spirit of goodwill, but I do detect a change in the air on the two massive contested takeover bids that are already on the blocks - Vodafone/Mannesmann, and the battle for NatWest.
Having concluded his largely fruitless tour of the financial capitals of the world, Klaus Esser appears to be saying "not at this price" rather than "not at any price" for the Vodafone offer. Chris Gent has said he will not increase the offer. But I sniff a deal. I suspect that if Vodafone agreed to a more Germanic corporate structure, with an advisory board, and agreed to pay a large cash dividend to Mannesmann shareholders, an agreement could not be too far away.
At NatWest, Sir David Rowland appears to have given up the ghost. It looks as if he will strike a deal either with Bank of Scotland or with Royal Bank. And, tomorrow, John Bridgeman at the OFT will pass his report to Stephen Byers, telling the Trade Secretary to approve the bid. Mr Byers will no doubt rubber-stamp this well before Christmas, so clearing the way for an improved Royal Bank offer, which no doubt will be accepted by NatWest.
Credit from the fearless
What is it about trade finance companies? Investors in Versailles Group have been buying - as it were - the story that Carl Cushnie has been promoting without ever understanding what the company is all about. Mr Cushnie, of course, has no real experience of financial markets. He was an engineer, then he ran a computer distribution company which specialised in ICL, then somehow he found himself in the world of trade finance, heading up Versailles (the name, by the way, was chosen supposedly just because it implied trust).
However, the writing as on the wall long before the Department of Trade and Industry started querying Versailles's accounting practices. By all accounts, the company thrives on referrals from the banks - notably our friends, Bank of Scotland - which themselves are hardly likely to pass on business if they think there is good money to be made. The fact is that Versailles extended credit in places where others feared to tread.
Not that this is a bad business, look at the success of consumer credit group, Provident Financial. But experience shows that this can be a tricky area to operate. Those with good memories might recall the Icarus-like flight of Associated Henriques, a company rather similar to Versailles, which was run by two South African emigres and which collapsed in the early 1990s. Then there is the topsy turvey ride of London Forfaiting, whose dabbles in eastern European financing and associated write-offs have actually pushed to group to the precipice of solvency.
The fact is that the City does not understand these companies and how they make their pots of money. And if the experts are befuddled, what chance, you wonder, do ordinary investors have?
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