Green’s £500m war chest fuels speculation over M&S buyout

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SPECULATION is mounting that Topshop tycoon Sir Philip Green will launch another takeover bid for Marks & Spencer after he sold a 25 per cent stake in Topshop and Topman for £500m.

Sir Philip said the sale of a 25 per cent stake to American private equity firm Leonard Green & Partners will help to expand the Topshop brand across the US and internationally, but investors believe he still holds a torch for M&S following two failed attempts to buy the high street giant.

Rik Thakrar, risk manager and senior dealer at Spread Co, said: “It is no secret that Sir Philip has long coveted Marks & Spencer and has wanted to bring his expertise to restore the blue-blooded retailer to former glories.

“Investors are clearly speculating that the Arcadia chairman will use his newly acquired funds to launch a takeover of M&S.

“Despite shares being close to a one-month high, the Spread Co dealing desk has recorded a surge in long positions in M&S this morning.”

Investors take out long positions in stock that they think will rise in the future. Sir Philip would have to pitch a bid at a significant premium to M&S’s current share price.

Sir Philip, who bought department store chain Bhs for £200m in 2000, Arcadia for £850m in 2002, has said he is not averse to doing another major deal if the right one came up.

At Arcadia’s results last month he said: “There are two or three things in my head. If they ever turned up, we’d have to look at them,” he said, declining to elaborate.

If there is a major consolidation in the retail sector, he said Arcadia will “want to have a seat at the table,” and finance will not be an issue.

“Do I think the banks would back me to go and find money? Absolutely, we’ve delivered on everything we said we’d do,” he said.

The sale to Leonard Green & Partners is the first time Sir Philip has sold a stake to anyone outside his family-controlled Arcadia Group.

Topshop and Topman were valued £2bn following the sale.

The entrepreneur, who also runs Miss Selfridge, Bhs, Burton and Dorothy Perkins, said the deal will help his group to expand the Topshop and Topman brands further across the US and internationally.

Topshop, which gained huge fashion kudos when it launched a collaboration with model Kate Moss, has steadily increased its international footprint in recent years and now has 615 franchised shops across 39 countries.

Sir Philip signalled a potential spending spree to come when he said the cash from the sale will remain in the Arcadia Group.

He said this will leave the group debt-free and give it the “flexibility to look at other opportunities”.

“This is a very exciting time for the Arcadia Group, with a clear strategy now in place for Topshop/Topman to become major global players,” he said.

The deal follows months of talks with Leonard Green & Partners, which has a history of making retail investments in the US.

Its investments include organic food group Whole Foods Market, fashion chain J.Crew, Neiman Marcus luxury department stores and pet products retailer Petco.

John Stevenson, retail analyst at Peel Hunt, said: “A US backer should give you a lot of expertise.

“This is a reasonable opportunity for Green to start to divest his portfolio.

“Because it is Philip we assume there is no exit strategy, but he will have to exit at some point and maybe this is the start of that.”

Last month Arcadia beat its high street rivals with a strong rise in profits despite flat sales.

The group, which opened a new Topshop megastore fronting Briggate in October, said better stock management had led to less discounting.

Arcadia posted a 25 per cent rise in underlying annual profits to £170m.

Arcadia’s total sales were flat at £2.68bn, while like-for-like sales were down 0.7 per cent and down 3.2 per cent in the UK. However, margins rose 1.2 percentage points.

Sir Philip said retailers should stop moaning about the economic downturn and they need to raise their game.

“We’ve got to trade. I can’t keep listening to all these people making it up as they go along,” he said.

“We’re here in the streets, we’ve got 45,000 staff, we’ve got a £500m payroll, we’ve got to make it work,” he said.

Arcadia’s like-for-like sales rose 0.7 per cent in the first ten weeks of its new financial year.

E-commerce sales rose 22 per cent in the 2011-12 year.

ros.snowdon@ypn.co.uk