Green to stake £1bn on bid for M&S

Lord Stevenson leads the search for further City heavyweights to join retail billionaire's team
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The Independent Online

Philip Green will put £1bn of his own money into his bid for Marks & Spencer, the terms of which will be submitted to the board of the high street retailer later this week.

Lord Stevenson of Coddenham will also begin a search this week for further retailing experts and heavyweight City recruits to join the board of Revival, the company through which Mr Green plans to make a bid for M&S.

The chairman of Pearson and HBOS has agreed to become Revival's senior independent non-executive director - a high-profile appointment that the Green camp hopes will add credibility to the bid. Lord Stevenson's involvement will also go some way to alleviate shareholder fears about a takeover by Mr Green, providing them with some reassurance that the new company will not be run as part of his private empire - which spans BhS and the Burton to Dorothy Perkins fashion chain Arcadia - and that it will have a fully independent board.

How the rest of the deal will be structured is yet to be finalised, but it seems likely that as much as 75 per cent of the sum will be cash, with shareholders offered 25 per cent of the equity of the new company. Shares in M&S rose to 359.5p last week, and some shareholders will want as much as 400p as a take-out price, valuing M&S at more than £9bn. An all-cash alternative may also be offered.

While Mr Green and his advisers finalise the debt and equity make-up of an offer that could top £10bn, venture capitalists are also lining up to form a rival bidding consortium. KKR, CVC and Permira are all thought to be interested in making a bid. They could offer more cash to shareholders, but will wait in the wings, however, until Mr Green unveils his proposals.

M&S was keeping its powder dry yesterday over how it planned to fend off Mr Green. But it emerged over the weekend that the company hired Morgan Stanley six months ago to advise it on a number of general "defence scenarios".

"It is difficult to go about defending the business when you don't yet know what the attack is going to be," a source close to the company said yesterday.

There is a power vacuum at the top of the company, with some shareholders expecting Luc Vandevelde, the outgoing chairman, to depart the group within days, and Roger Holmes, its chief executive, also under pressure to step down.

Stuart Rose, the former boss of Arcadia, is thought to be top of the list of replacements and could be parachuted in to help lead the defence of M&S. But he has also been in discussions with several private equity houses over recent months, and is as likely to front a venture capital bid as he is to join M&S, where he would face opposition from a number of board members loyal to Mr Holmes.

Mr Green is keen to have the support of the board and does not want to go through a due diligence process, believing it to be a lengthy and unnecessary exercise. He wants a quick takeover and has prepared between six and 10 questions to ask the board about the performance of its core retail operation.

If successful in his bid, he is expected to revive the traditional St Michael brand, which M&S scrapped, and to take hands-on control of running the M&S business.

Despite estimates that he could end up controlling up to 25 per cent of the UK clothing market, Mr Green does not believe there will be serious competition issues to iron out.