Great Titchfield Street, London -- This morning corporate raider Philip Green released a statement saying he has "no present intention of proceeding with an offer for Marks & Spencer(LSE: MKS)". The buccaneer specialises in buying up flagging retailers and reviving their fortunes by either breaking them up, as he did with Sears a few years ago, or injecting some financial chutzpah into their proceedings.
When he made his initial statement, that he had retained investment bank Donaldson, Lufkin & Jenrette to advise him about a possible M&S bid, on 13th December last year, the share price hit 300p amid much speculation. Today in early trading the shares fell over 7% to 235p. That's over a fifth lower than when the potential Green bid was confirmed.
Following this pull out one has to wonder how exactly the group will turn around its fortunes on its own. To be honest the Green bid was always unlikely. M&S has a massive portfolio of high street shops. This type of department store is just not used that much by people at present. That makes these stores pretty worthless in their present format. Who would want to buy these redundant pieces of real estate?
The general economic picture looks buoyant at the moment precisely because consumers are confident that they can get lower retail prices. Before, during periods of raging inflation, people were just happy when prices didn't go up too much. Now we positively choose to shop elsewhere if common-or-garden goods aren't reduced.
We should be rejoicing that retailers are having a tough time. That means it's better for the stock market and share prices generally. Individual investors, instead of wasting their precious cash on expensive ready-made meals, or unfashionable underwear, or boring suits, all at outrageous prices, can put their hard-earned on long-term investments.
If that's the case perhaps M&S should concentrate on selling sandwiches and financial services. They wouldn't need their big outmoded stores to do this. I'm not offering to put this idea to the M&S board. But Philip Green has reserved the right to join an offer "in the event that one is made by a third party." Green, in concert with DLJ, had apparently managed to persuade several banks to underwrite an offer involving a lot of cash.
Green points out that M&S's operating profit halved between March 1998 and March 1999. Prospects are not good for a recovery this year. In fact expect things to get worse. How can they possibly get better? I'm afraid this is a seismic shift and retailers are going to have to get used to lower prices, lower profits and ultimately lower stock market price earnings ratios, which in effect means lower share price valuations for this whole sector.
After this foray into no-man's land I'm going back into my trench to await bombardments. Prove me wrong on the M&S message board.
Other Breaking News
NatWest (LSE: NWB) seems to be having talks with the Royal Bank of Scotland(LSE: RBOS). Expect an announcement sometime today from the English high street bank. "Sources" believe the group is about to recommend the Royal Bank's offer over the untitled bid from the plain Bank of Scotland(LSE: BSCT). The titled bank's shares fell 43p, or 4.8%, to 861p.
There was a buzz about Internet IPOs this morning. Registered users of Interactive Investor International should have received their prospectuses this morning. Applications have to be filled and returned by next Tuesday. We shall publish a Foolish assessment of the company shortly.
Also Lastminute.com confirmed that it will float between 20% and 25% of its equity on the London Stock Exchange and Nasdaq this March. The company claims it has over 800,000 registered users. For more information and the lastminute press release take a look at the Internet Flotations board.
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