I HAVE been thinking about bidding for Marks & Spencer. With a few friends, I have discussed the idea over dinner and we think that, if all the staff would give us their life savings, we might be able to put together an offer that shareholders would find attractive.
The vehicle through which we might make this bid has no track record but we can assure you that we are good for several billion pounds. (Well, if the M&S staff dig deep, that is.) Does that sound exciting? Apparently it took little more than such a scenario to inspire gamblers — they were certainly not investors — to hurl about £150 million at M&S stock in the last few minutes of trading yesterday. This despite the fact that earlier in the day Philip Green, the Bhs owner, had announced that he would not be returning with a fresh bid for the group, although he reserved the right to do so if anyone else slapped in an offer.
It seems highly unlikely that Mark Paulsmeier will be the one to rekindle Mr Green’s interest. Yet on the strength of boastful and unsubstantiated claims on a website and a few faxes, the South African has stirred up a flurry of excitement over the future of M&S.Its shares gained 6.5p to close at 374p on the day. That is still some way off the 400p a share that Mr Green mooted last year, but the rejection by the M&S board provided him with what now looks like a lucky escape. Trading is tough on the high street, with M&S suffering at least as much as its rivals. Children’s wear is said to be the one bright spot in the business, at last reclaiming some of its market share.
Mr Paulsmeier is not suggesting how he might help the group to recover its lost ground. Before sweeping up any more M&S stock in the hope of a bid from this mystery man, punters should inquire as to his retail credentials.
Those who have been betting on a bid for that other retail sob story, J Sainsbury, are beginning to lose heart. The shares slipped yesterday as the Gatsby charity halved its stake in the business. This was a momentous decision for the Sainsbury family; its charities have been remarkable in their tenacity, holding on to the shares while the price has tumbled as management blundered.
Now, it seems, Judith Portrait must have decided that the price has reached the best it is likely to do for some time. This is significant since she looks after the blind trusts in which Lord Sainsbury of Turville’s pivotal holding rests. The verdict of the market was that her decision means that a bid for the company looks less likely than it did at the end of last year.
Yet interest in the company remains strong. The only problem is the matter of price. If the Gatsby decision leaves the stock to fall back to around 360p, it may be that potential bidders will begin to resurface. But they cannot succeed without the support of the Sainsbury family. This will depend on whether they are confident that Justin King, the chief executive, and Philip Hampton, the chairman, can sort out Sainsbury’s in the full glare of the public spotlight and without extra help.
Lord Sainsbury, while he remains Science Minister, can have no say in determining whether the business should be taken private in a deal that might see the family halving its stake. It would be a huge decision for a trustee to take on his behalf. The prevailing view is that this dilemma may influence his decision on whether to withdraw from government after the imminent general election.
It would be easier for a would-be bidder to negotiate a deal with him direct than with Ms Portrait. But she has now indicated that she could be a seller of the stock.
Optimism the best medicine
SIR TOM MCKILLOP has had a difficult year at AstraZeneca. Waiving half the bonus that was contractually his due has probably been less painful than the agonies he has had to go through as Astra’s drugs have run into problems with the licensing authorities and the reputation of the company, and its share price, have been hammered.
But Sir Tom is not about to desert his post. Rumours that he would soon be joining the board of Royal Bank of Scotland with a view to succeeding Sir George Matthewson as chairman next year have been raising some eyebrows in the City. With a non-executive role at BP as well, it would have been too much of a drain for Sir Tom to continue with his role at AZ.
Sir Tom, however, is not about to head back to his Scottish homeland. The RBS chairmanship might have some appeal but his first loyalty is, it seems, to AZ and he will be staying on after he reaches his formal retirement age next month. The furore over the problems with Exanta, which prevents blood clots, and Crestor, the lipid-lowering drug, distracted attention from the overall performance of the business. Sales grew by 9 per cent last year and operating profits by 15 per cent at constant exchange rates. But the share price reflected fears over where future growth might come from if the US Food and Drug Administration was to block the company’s new products.
Sir Tom is not downhearted. He believes that Crestor will be cleared and that, even if Exanta does not make it through the FDA, a later version of the drug, without some of the controversial side-effects, is already well on the way through the development process.
Optimistically, perhaps, he believes that the crisis over Cox-2 inhibitors is going to lead to a more sensible attitude in evaluating new drugs. The FDA’s statement on Vioxx recently indicated that the authority was prepared to accept that, although there were risks, the potential benefits outweighed them.
Sophisticated drugs will have side-effects but the risk/benefits equation is what will have to be weighed up. The problem may be that those prescribing the drugs are not always the best qualified to work out that equation or to describe it adequately to patients. Astra Zeneca, and other drug companies, are working on ways to help doctors with on-line advice. They want their drugs to work.
Gent goes public
SIR CHRISTOPHER GENT is a revolutionary, as he proved at Vodafone. Now he aims to revolutionise the public sector. Yesterday he presided over the launch of Manifesto for Reform, drawn up by Reform, the independent think-tank of which he is chairman.
“We cannot go on transferring resources from the efficient and productive private sector and pouring them into monopolistic, unproductive public services,” he declared, just one day after the release of a report showing that a quarter of all employees are now in the public sector.
Reform has four core principles. It wants to see politicians removed from the day-to-day running of public services instead of trying to run what is effectively a £500 billion conglomerate with 5.5 million employees. Make the managers accountable, says the manifesto. It worked at Vodafone and it works at GlaxoSmithKline, where Sir Christopher is now chairman.
Reform wants public sector monopolies to be fully opened to competition, with spending powers transferred to consumers. Bravely, it calls for co-payment to be introduced, to enhance funding and moderate demand. Governments shrink from the idea of a small charge for a visit to a GP but it might deter some of those who currently waste doctors’ time.
And Reform wants public spending increases brought back below the trend rate of growth. That way the upward trend in taxes, stealthy and otherwise, could be reversed.
JAMES DYSON is demonstrating that clever engineering and design, plus some canny product placement in TV shows, can conquer the world. His is a remarkable story which has much further to go. Although manufacturing of his vacuum cleaners has now moved to Malaysia, he still employs 1,200 people in Malmesbury. With new product ideas bubbling up, that number will grow. So will Dyson’s profits, which doubled to more than £100 million last year. And since he could not get backing at the beginning, it is all his.
