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Tycoon Sets His Sights on British Retail Institution

Billionaire's unsolicited offer for Marks & Spencer pits him against a former adversary, who now heads the chain.

June 04, 2004|John Daniszewski | Times Staff Writer

LONDON — Call it the Showdown at the Marble Arch.

Philip Green, a rags-to-riches billionaire with an uncanny knack for buying bargain-basement retail companies and turning them to gold, is taking aim at Marks & Spencer -- an iconic brand name in Britain for more than a century.

But to get it, he will have to shoot past a high-flying former associate who has just taken over as chief executive at "Marks & Sparks," whose flagship store near London's Marble Arch is one of the most hallowed symbols of British retailing.

And it looks like the somewhat dowdy department store chain, where generations of middle-class Brits have bought their children's knickers, won't go cheap.

Green, the South London-born tycoon who lives in Monaco on weekends and flies in on a private jet each week to manage a burgeoning retail empire, wants to take the 365-store Marks & Spencer private.

His opening bid, made public Thursday, was valued as high as $16 billion -- of which $1.7 billion would come from his personal fortune.

"I think that shows I'm serious about this proposal," he told the Times of London.

But current management was not impressed.

"Not worthy of consideration," sniffed Green's adversary, Stuart Rose, who said the bid was a "distraction" from his plans to breathe new life into the company. Rose was named to head M&S only last weekend, as part of an emergency strategy by its board to fend off Green. Saying he "didn't take the job to sell the business," Rose pledged to regain the high ground for Marks & Spencer, which has lost its title of Britain's largest retailer to supermarket giant Tesco.

Green and Rose have tangled before. Green bought out Rose's old company, the mass-market clothing group Arcadia, two years ago after another bitter takeover fight. He dismissed Rose, albeit with $45 million in stock options as consolation.

Because almost everyone in Britain knows and goes to Marks & Spencer, and because the two principals are such legendary figures in the world of retail, the fight promises to be one of the most followed business stories in years in the nation.

Analysts say that if Green wins, his chains will control about one-fifth of the country's clothing market and more than a quarter of women's clothing. Not to mention unmentionables -- M&S already owns a 27% share of the women's lingerie market.

Reports here say the tycoon, who has graying curly hair and a pack-a-day cigarette habit, has been dreaming for years of acquiring Marks & Spencer. Adding M&S to his other middle-of-the-road British stores -- Bhs, Topshop, Burton, Miss Selfridge and Dorothy Perkins -- would make him the undisputed king of what Britons call the high street.

When reports of Green's interest in M&S began circulating last month, the company's shares gained 30%. The stock closed down slightly Thursday at about $6.50.

In an interview with the Sunday Observer, Green said he was sure he could wring much more value out of M&S with his time-proven methods of being quick, flexible and following fashion trends and acting on them.

"This is what I'm about," he said.

Marks & Spencer has been struggling with sliding sales. Its former managers, ousted last weekend, had begun talking about slashing prices to bring back customers and eliminating 1,000 jobs to cut costs.

But analysts said the company was in denial about more fundamental shortcomings, becoming too complacent and losing business to more fleet-footed, style-conscious retailers.

"The business is not bust -- this is a fine business with a great heritage with 10 million customers a week coming through its stores, and which made three-quarters of a billion pounds in profit last year," Rose said.

Rupert Trotter, a retailing analyst for ISIS Asset Management, said he considered Green's offer Thursday only an opening gambit in a takeover battle that would stretch out for "months, not weeks."

Green said he would pay about three pounds a share and offer a 25% stake in Revival Acquisitions Inc., the company he formed to make the bid. Some analysts disputed whether the bid was really worth the claimed $16 billion.

For now, Trotter said, shareholders are likely to "bide their time and see where the value lies." In other words, they'll be waiting for Green's second offer.

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