More M&S investors back Green as Rose plots the fightback

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The Independent Online

Philip Green turned up the pressure on Marks & Spencer yesterday, saying 22.6 per cent of shareholders supported his £9.1bn takeover proposal in some way.

Revival Acquisitions, Mr Green's bidding vehicle, said investors owning or in control of 1.8 per cent of the company's shares and holders of derivatives representing 7.9 per cent wanted M&S to allow Revival to carry out due diligence. Brandes Investment Partners and Schroder Investment Management, with 12.9 per cent, have already said they would accept Mr Green's 400p-a-share offer if M&S recommend it.

M&S, however, scoffed at Mr Green's latest statement as it prepared to announce a £1.5bn-£2bn share buy-back programme on Monday, along with initiatives to boost gross margins to more than 50 per cent.

Mr Green also published a letter to David Norgrove, the chairman of the M&S pension fund trustees, accusing them of "pious nonsense" in saying they could not meet him to discuss the pension fund finances as part of his bid. He compared the situation to the WH Smith trustees who agreed to meet a potential bidder even though the offer was unsuccessful. "Why, for example, when the deficit in January 2004 was identified at £1bn, was the decision taken that an injection of only £400m was adequate?" Mr Green demanded in the letter.

On the level of support for Mr Green's bid, a source close to M&S attacked Revival's inclusion of so many derivatives holders who had borrowed shares. In a carefully drafted announcement, cleared by the Takeover Panel, Revival said: "Relevant holders holding derivatives contracts may have no contractual rights to call for the delivery of the underlying M&S ordinary shares or to direct how the votes attaching to such shares are cast. Relevant holders remain free to dispose of their interests and there can be no certainty that this indicated level of support will be maintained."

The M&S source said: "We're not very impressed that Philip seems to have got on his side a group of investors and hedge funds who don't own the stock, don't have the voting rights to the shares and clearly have no interests in the long-term future of M&S."

Mr Green's statement was designed to apply maximum pressure on Stuart Rose, the chief executive of M&S, who will give a crucial trading update and strategy statement on Monday. Mr Rose is planning a share buy-back programme over the next 2-3 years aimed at increasing earnings per share and which will hand back cash equal to about 25 per cent of the company's latest market value, similar to the share buy-back programme of Next, one of its biggest clothing rivals.

To entice customers back Mr Rose will announce a renewed focus on the retailer's core 35-year-old and above target market, with its Per Una Due teenager range being axed. He will emphasise its core market of older shoppers is a growth market. The company's furnishing store in Gateshead will also be axed.

He will focus on the company's womenswear range with an emphasis on more stylish products. The company's food range will be rationalised, with hundreds of lines being cut out and simpler terms of business being introduced for suppliers.

M&S has already announced an extra £100m a year in the discounts it receives from suppliers. But many analysts are sceptical these improvements will remain in the long term as manufacturers simply raise prices to cover the bigger discounts they are being forced to give. Analysts want to see more manpower resources committed to working with suppliers on a detailed, garment-by-garment basis to achieve long-term buying improvements that could be worth closer to £200m-£300m.

Mr Rose will also announce the results of a revaluation on M&S's property portfolio. He will say M&S's bricks and mortar are now worth close to £3.5bn, giving him the scope to borrow at low interest rates to fund the share buy-back programme.