M&S rejects Green's £9bn offer

Billionaire's proposal 'significantly undervalues' retailer * Value of paper element questioned by City
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The Independent Online

Marks & Spencer promised yesterday to overhaul its flagging business after it rejected a £9bn cash-and-paper offer from Philip Green for "significantly undervaluing" the high street retailer.

Marks & Spencer promised yesterday to overhaul its flagging business after it rejected a £9bn cash-and-paper offer from Philip Green for "significantly undervaluing" the high street retailer.

The group's refusal to consider Mr Green's bid approach left the Monaco billionaire considering his options.

Shares in M&S dived 10p to 356p after investors said they would rather back the retailer's new management team than let Mr Green get his hands on another retail bargain.

Paul Myners, M&S's acting chairman, said Mr Green's proposal "simply doesn't come to a number which we think has any merit at all". He added: "Green's success has been through financial engineering. He buys cheaply very well. He buys garments cheaply and he buys companies cheaply. But he's not going to buy this company cheaply."

Revival, Mr Green's bid vehicle, said it would offer shareholders between 290p and 310p per share in cash for M&S, and give them 25 per cent of a new holding company for the group.

Analysts struggled to value the stake in what would be a heavily indebted new company controlled by Mr Green, with estimates ranging from as little as 22p per share to 90p per share.

David Cumming, head of UK equities at Standard Life, said: "Stuart Rose [the M&S chief executive] is seen as a man who can deliver. Shareholders will back him unless a bid comes in significantly higher than the one currently on offer." Rupert Trotter, at Isis Asset Management, said: "I believe the shares are worth £4."

Mr Green laced his proposal with conditions including a recommendation from the M&S board and the answers to four questions, such as the nature of the contractual relationship between M&S and its most important supplier, George Davies. Unless M&S backs down and discloses the terms struck with Mr Davies before he launched his per una brand in September 2001, Mr Green will cut the cash proportion of the deal by 20p - worth £450m.

Mr Rose admitted yesterday that M&S did not own the fashion label. "George has brought some real dynamics to this part of the business," he said, adding: "I want to talk to him." Mr Davies's contract runs out next year and it is not known whether M&S will have to buy him out to retain control of the brand.

"This is not a business that's bust", Mr Rose said, adding his first priority would be to tackle the group's dismal sales of clothing. Analysts believe this could prompt the departure of Vittorio Radice, promoted recently to head its core clothing division. Mr Rose added: "If I need to shuffle people around I will."

Revival said £9bn of "committed financing" was in place. Mr Green is prepared to put £1.05bn of his own family money into his bid for M&S, with his five banks - HBOS, Goldman Sachs, Halifax, Merrill Lynch and Royal Bank of Scotland - providing £7.5bn in debt financing. HBOS, Goldman Sachs and Barclays Capital are providing additional equity funding of £450m.

The Green camp suffered a further blow yesterday when it was forced to switch legal advisers after the High Court ruled that Mr Green's legal firm, Freshfields Bruckhaus Deringer, could not represent him. Freshfields drew up the controversial contract between M&S and Mr Davies, presenting a "conflict of interest".

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