Rival retailers move on to next challenge

Philip Green was left to mull what might have been last night after his second tilt at Marks & Spencer failed. However, he can return to Monaco knowing he had pulled together the largest amount of money the City has seen for a leveraged takeover bid - £11.1bn from some of the City's most blue-chip banks.

Stuart Rose, the victorious chief executive of M&S, now faces a more difficult future. He knows that the price of 400p - the level of Mr Green's bid - will forever be hanging over him as the share price level at which the City will judge his performance.

If the share price languishes below that level for long then Mr Rose, who earned more than £20m when Mr Green successfully bought Arcadia, will not be in the job for long.

Both Mr Rose and Paul Myners, his chairman at M&S, were trying to be generous in victory and not crow over Mr Green's bad luck. Mr Rose, after learning of his victory, said: "The hard work begins now. We know we've got to deliver."

Mr Myners said: "As a board we are focused on improving the performance of M&S and delivering the long-term value that we have identified for the benefit of our shareholders."

The background to the dramatic bid battle has been one of the most intriguing financial chess games in the City's history. Yesterday Mr Green called Mr Myners after the M&S annual meeting and demanded that he be given due diligence access. Mr Myners refused. Mr Green's advisers, including Goldman Sachs and Merrill Lynch, contacted the M&S team and told them that unless there was a meeting agreed by 8pm last night they would walk away. There was no meeting, and no bid.

Mr Green gathered one of the most impressive City teams for his bid. He had identified M&S as a bid target as early as 1999 when a first tilt at the retailer failed. That was seen as a rather dirty affair. Bruised by his treatment, Mr Green retired from the scene but has been watching ever since.

In the intervening years M&S has stalled. It has gone through at least three major changes of senior management while its once loyal customer base of Middle England shoppers have found more attractive clothing at the likes of Next and equally good food at Tesco and Waitrose.

This time, Mr Green started out stealthily at the end of May, announcing he was considering a bid of between 290p and 310p plus a stake in his Revival Acquisitions bid vehicle.

The M&S board dismissed it, following up the action with the masterstroke that probably saved their skins in the long run - the appointment of Stuart Rose as chief executive.

While Mr Green and his team were knocked back by the appointment, they came again, raising the putative bid and more significantly starting to build support among institutions to put pressure on the M&S board to agree to talks.

Analysts will debate for years to come where Mr Green went wrong. One obvious question mark will be over his decision this month to announce that 400p-a-share or 335p plus a 30 per cent stake in Revival would be his final offer.

With the eventual support of 34 per cent of M&S shareholders, Mr Green probably thought he had done enough to at least get a meeting with the M&S management. However, he underestimated the stubbornness of Mssrs Rose and Myners - but this may not be the end of the story. Mr Green can bid again in six months. If the share price is not hovering at or about 400p, he may well be third time lucky.

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