Green turns tables on M&S board with raised £9.1bn bid

'Final' offer of 400p a share puts board on defensive * Biggest shareholder still backing management
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The Independent Online

Leading shareholders in Marks & Spencer yesterday called on its management to begin talks with Philip Green after the Bhs billionaire increased his offer for the group to 400p a share.

Leading shareholders in Marks & Spencer yesterday called on its management to begin talks with Philip Green after the Bhs billionaire increased his offer for the group to 400p a share.

The calls from shareholders mark something of a breakthrough for an increasingly ebullient Mr Green, who has been stalking the retailer since late May. M&S, which received the latest proposal yesterday morning, made no official response during the day. Its board will meet again this morning to clarify its position.

"I've done my job, haven't I?" Mr Green said yesterday after announcing his willingness to bid up to 400p a share, a level that many shareholders saw as the starting point for the board to take him seriously.

Several large shareholders, such as Standard Life and Isis, who had dismissed Mr Green's previous offer of 370p a share, were more conciliatory towards him, suggesting the company's board would now have to engage in talks with him.

M&S, however, is still understood to have the backing of Brandes Investment Partners, the US investor that owns 11.7 per cent of the company. It threw its support behind the board after telephoning the company to clarify its position regarding Mr Green's proposal.

The call was made after Mr Green announced that Brandes had "irrevocably undertaken" to accept his offer, subject to certain conditions.

Brandes is understood to have spelt out to M&S that its acceptance of a bid from Mr Green was conditional on a recommendation of the offer from the company's board and not a hostile move on its part.

Some of M&S largest shareholders yesterday urged M&S to take Mr Green seriously. David Cummings, head of UK equities at Standard Life Investment Management, which owns just over 2 per cent of M&S, said: "The proposed bid merits consideration. M&S will now have to articulate their new strategy under Stuart Rose clearly and then respond to shareholders' views on this strategy before deciding whether to reject or accept this bid."

Rupert Trotter, a fund manager with Isis, another large M&S shareholder, said: "I fundamentally feel that 400p is a more sensible ball park figure. The key event now is what's going to happen on Monday."

One of M&S's top five shareholders said: "What we expect is that the board would take a 400p or 400p-plus offer seriously." A top 10 shareholder said: "We do expect that this will succeed at 400p but we want to see a proper, formal offer. We don't think the board will come up with much of a defence and we expect them to enter a dialogue with Philip Green."

An M&S spokeswoman said: "We are considering our position and we are having a further board meeting tomorrow morning." If M&S agrees to talk to Mr Green it will still want to mount a robust defence of itself on Monday when Stuart Rose, the new chief executive, sets out his strategic thinking for the company. However, shareholders said yesterday they would expect to see Mr Rose announce a significant return of cash, of about £500m, to investors as part of his strategic plan. Such a move could help lift the M&S share price to a level where the board could comfortably reject Mr Green's new proposal.

Brian Gallagher, of Gartmore, said: "I think a buy-back would be appropriate."

Mr Green said his 400p-a-share proposal was his final offer, although he reserved the right to make a higher offer in the event of a rival bid emerging. The offer is structured as either all cash at 400p a share or 335p in cash plus shares in Revival Acquisitions, Mr Green's bidding vehicle, worth 30 per cent of the company.

Any offer, however, is conditional on a recommendation from the M&S board, satisfactory due diligence and finalisation of documentation. Its shares finished 2.29 per cent up, reflecting continuing doubts that Mr Green will succeed.

Mr Green said: "If I don't get a recommendation I'm not going anywhere. I'm not going to bid blind for this company at any price. I don't want to spend £80m to go hostile just to end up in a fight in the street. I've paid up and I want access." Trustees of the M&S pension fund told Mr Green yesterday they would not meet him to discuss the fund's financial affairs. Mr Green now has to rely on the M&S board allowing him to undertake detailed due diligence before he can understand the pension fund liabilities and what they might mean for his bid.

Shareholders want M&S to talk to Mr Green, but analysts believe the board is still likely to reject his proposal. Nick Bubb, of Evolution Beeson Gregory, said: "The cost-cutting and the margin improvements and everything else that will improve the bottom line ... will make 400p insufficient."