M&S shares jump amid bid gossip as Rose prepares to face investors

Sir Philip Green denies he is building a stake in the struggling retailer, while sales soar at rival
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Shares in Marks & Spencer jumped by more than 6 per cent yesterday ahead of what promises to be a stormy AGM today, after speculation that the retail giant might become a bid target.

Speculation emerged about the Arcadia boss and billionaire Sir Philip Green being a potential suitor, but he denied he was buying a stake in any listed company. Sir Philip declined to comment on M&S, but said: "I have not liked the [overall stock] market for about 16 months. Maybe I got lucky and decided not to invest."

M&S's share price, which had previously fallen for seven consecutive days, staged a rally, closing up 14.5p to 231.5p.

City analysts downplayed the prospect of a bid for M&S from Sir Philip or any other third party, given the parlous state of the debt markets.

The Pali International analyst Nick Bubb described speculation of a bid by Sir Philip as a "pipe dream". Mr Bubb added: "He is unlikely to be able to borrow £8bn from his friends at the banks this time around."

The Credit Suisse analyst Tony Shiret said: "You cannot make a leveraged buyout stack up at the current share price."

Today, Sir Stuart faces a bruising encounter with shareholders at the annual meeting over a number of issues, including his controversial promotion to executive chairman, last week's profit warning, the sacking of the food director Steve Esom, and its low share price.

Sir Stuart is expected to be re-elected as a director, but the City will be scrutinising the scale of the protest vote. However, PIRC, the corporate governance body, which has been a vocal critic of Sir Stuart's dual role, yesterday played down the prospect of a large protest vote.

It has been reported that institutional investors, including ABP, Co-operative Insurance, Railpen and USS, have indicated that they plan to abstain on the election vote, but oppose the company's report and accounts.

PIRC said: "Figures suggesting up to 30 per cent of shareholders may fail to back the company ought to be treated with scepticism. Not only politicians indulge in managing expectations. If you really want to put [the] vote in context, consider that the average opposition vote on director elections in recent years has been well under 2 per cent."

Speaking to journalists at a Fashion Retail Academy event yesterday, Sir Stuart said he was confident shareholders would back him. "I would be very surprised if we didn't end up tomorrow at the same place we are today."

However, Pali's Mr Bubb said that after the AGM Sir Stuart needs to knuckle down. "The people in the City are getting fed up with all the excuses and want him to get his head down. He has to get on with managing the downturn." Mr Bubb said that a potential protest vote will have the effect of "marking his card", adding: "He cannot afford any more mistakes."

Mr Shiret said: "All this finessing against expectation [concerning the size of his re-election vote] is not the point. The point is that people don't really want him to be chief executive and executive chairman."

Mr Shiret added that if a textbook was written on corporate governance, then M&S and its recent performance is a good example of why there should not be a dual role. "There is already a significant amount of dissatisfaction, sufficient that him and the other non-executives should be considering the appropriate way to carry on," said Mr Shiret.

Speculation resurfaced yesterday about other potential bid candidates for M&S, including Sainsbury's and the Qatar Investment Authority, which tried to buy Sainsbury's last year. But City analysts said the market conditions were not right for either Sainsbury's to consider a bid for M&S or vice versa.

Sir Philip agreed with Sir Stuart that trading conditions on the high street were tough. Sir Philip said: "It's hard work. The answer is you have to work hard and find what customers want to buy."