US investor Brandes profits from £160m sale of M&S shares

Click to follow
The Independent Online

The American investment fund that pressed Marks & Spencer to open its books to Philip Green's 400p-a-share approach, sold shares worth £160m in the retailer yesterday as it moved to exploit the stock's seven-year high.

Brandes, based in San Diego, locked in gains from the 47 per cent rise in the group's share price last year by selling 32 million shares at 500p to Deutsche Bank. Even after the sale, in which almost 2 per cent of the company's stock changed hands, the investment firm is still M&S's biggest shareholder with a 13.3 per cent stake.

Deutsche is believed to have placed the bulk of the stock with a variety of institutional investors. Shares in M&S closed up 2p at 499.5p.

Brandes is estimated to have made more than £500m - on paper at least - since it started picking up shares in M&S in 1999. Its investment strategy in the UK is masterminded by Amelia Morris, a senior analyst who manages its European Equity funds. Ms Morris, who declined to comment, has invested about £700m in M&S since 1999, almost doubling the value of Brandes' investment.

The US investment fund has agreed not to sell any more shares for at least 30 days, unless the stock rises by 10 per cent during that timeframe. M&S is tipped to be one of the retail sector's winners when it reports its Christmas trading figures on Tuesday. Much of that expectation is built into its share price, which topped 500p last week for the first time in more than seven years.

Brandes is famously secretive about its investment strategies, stating only that it prides itself as a value investor. But it was lured into showing its hand in Mr Green's abortive bid battle for M&S in 2004. After much cajoling, Brandes issued a statement backing the Bhs owner's 400p-a-share approach and urged M&S to let Mr Green start due diligence.

At the time, Brandes said it took a "conservative view regarding the timing, achievability and retention for shareholders of the margin and cost benefits outlined by M&S". In other words, it had little truck with the recovery strategy outlined by Stuart Rose, the chief executive.

It took more than 12 months for shares in the retailer to finally crack the 400p barrier in October, passing 500p three months later. Citigroup predicted underlying sales at M&S will rise by 0.9 per cent in the three months to the end of December, with a stronger profits margin likely to outweigh any top-line weakness.

Brandes paid less than 300p for most of its 220 million shares in M&S. Even at 300p, it would have made £64m profit from yesterday's share sale.