M&S Case

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The Battle for Marks & Spencer

Sir Philip Green’s Unsuccessful Takeover Attempt
‘We were in a board meeting deciding what to do next because at that time it was said that Green had
the backing of 30% of the Marks & Spencer shareholders. We were thinking what to do with Green’s
shares. It was quarter past seven. Robert [Swannel, Chairman of Citigroup’s European Investment
Bank] got a message on his Blackberry. Reuters had announced that Green had withdrawn! We will
never know why he pulled out. Who knows what that board meeting would have decided?’
Stuart Rose, CEO, Marks & Spencer
The Battle is Set
25 May 2004 – Marks & Spencer announces poor 2003/2004 results
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When management announced preliminary Marks & Spencer 2003/04 financial results in April 2004,
Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

there was speculation about a potential takeover bid.1 So, it was no surprise when The Business
reported on 19 April that Kohlberg Kravis Roberts and the UK retail entrepreneur Sir Philip Green were
Purchased for use on the SMM233 M&A, at Cass Business School.

thought to be considering bids for Marks & Spencer.2 This was denied by both.
Under pressure from investors, on 9 May Marks & Spencer announced that its Chairman, Luc
Vandevelde, who had been brought in four years earlier to turn the group around, was leaving as “he
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could no longer devote enough time to the struggling business.”3 Marks & Spencer’s directors were
Copyright encoded A76HM-JUJ9K-PJMN9I
looking for a senior figure with financial expertise to support the current CEO, Roger Holmes, to
Order reference F381722
implement the existing plan. Marks & Spencer’s investors also voiced their concerns that the
company might be vulnerable to a takeover if the retailer did not pick the right candidate.4
The final financial results released on 25 May 2004 came as no surprise: turnover in the 53 weeks to 3
April edged up from £8.02 billion to £8.3 billion, operating profit was up from £729.1 million to £823.9
million, while pre-tax profits rose from £506.9 million to £552.3 million. Although both the top and
bottom line were up, the low growth failed to impress the City.
Holmes admitted that significant improvements were needed in almost all parts of the struggling
retailer and promised a ‘complete transformation’ of Marks & Spencer: “Clearly we have a lot to do.
Whatever we were doing, it was not enough to take us on to the next stage.” Holmes, Chief Executive
for just over a year-and-a-half, said he planned to overhaul stores, cut prices, take direct control of
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more supply and overhaul the distribution network.
Analysts, however, remained unconvinced, saying that there was little new information and that
Holmes did not have a convincing vision. “They have changed all this stuff before, and last time they
changed this much it really damaged the business. There is significant risk here,” wrote the Financial
Times.6
Background of Sir Philip Green
Sir Philip Green, a British billionaire businessman who owns some of the UK's largest retailers
including Bhs and the Arcadia Group, was Britain's fourth richest man at the time of his attempted
takeover of Marks & Spencer. He controlled over 2,300 shops in the UK and assets worth
approximately £3.6 billion, which represented 12% of the UK clothing retail market, making his empire
the second-largest in the sector. The leader, Marks & Spencer, had been the target of a previous
unsuccessful takeover bid from Green in 2000.
This case study has been written by Scott Moeller and case writer Marianna Prodan of Cass Business School, City University as
a basis for classroom discussion rather than to illustrate effective or ineffective handling of an administrative situation. The case
was made possible by the co-operation of Marks & Spencer.
© 2010 S Moeller, Cass Business School
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Green made his first million by buying, turning around and finally selling a failing retailer called Jean
Jeanie in 1986. This marked his first successful M&A deal, and he continued with a list of more
prominent successful acquisitions in the UK retail sector:
Overview of Green’s acquisitions in the UK retail sector
Date Events
1986 Sale of Jean Jeanie franchise after six months of ownership
1994 Acquired Owen Owen department store chain
Acquired Olympus from Sears for £20 million; subsequently sold to JJB in 1998 for
1995
£290 million
1996 Buys discount chain Mark One out of receivership; sold 40% of stake in 2003
1997 Acquired Shoe Express from Sears for £8.3 million

1999 Acquired Sears for around £550 million

Netted over £150 million from subsequent disposal over next six months; backed by
1999
the Barclay brothers
2000 First approach for Marks & Spencer

Acquired Bhs for £200 million, equivalent to around 24% of historic sales; backed by
2000
the Barclay brothers and WestLB
Acquired Arcadia for 408 pence per share (c £850 million) at around 42% of historic
2002
sales; backed by the Bank of Scotland
Source: Credit Suisse First Boston (CSFB) Research, 28 May 2004
An analysis carried out by CSFB of his past deals shows some of his deal making abilities:7
 He was able to buy several businesses at bargain prices, most of which were in receivership or
in difficult financial condition. He bought Bhs in 2000 for £200 million, which equated to 24% of its
historical annual sales, and later, in 2002, Arcadia for £850 million - approximately 42% of its
historical annual sales.
 He then turned the businesses around and sold some of his previous acquisitions at a
significant profit for him and his financial backers. Most of his turnarounds focused on cutting costs
and disposing of non-core assets, rather than increased sales.
 He was able to walk away from potential deals if he felt that the deal price might not be in his
best interests. Good examples are his first approach to Marks & Spencer in 2000 and a bid for the
Safeway supermarket chain in 2003.
Background of Marks & Spencer

th
Marks & Spencer celebrated its 120 anniversary in 2004. Its history goes back to 1884, when Michael
Marks, a Russian-born Polish refugee opened a stall at Leeds Kirkgate Market. In 1894, Michael
formed a partnership with Tom Spencer, a former cashier at the wholesale company IJ Dewhirst.8
Marks & Spencer was one of the most iconic retail chains in the UK, with a reputation of being a
premium mid-market retailer. It was the largest clothing retailer in the UK by turnover, as well as being
a multi-billion pound food retailer. In 2004, it had 70,550 employees and numerous stores in former
British colonies and Eastern Europe.
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Marks & Spencer made its reputation in the 20th century with a policy of only selling British-made
goods. It entered into long-term relationships with British manufacturers and sold their goods under
the ‘St Michael’ brand (registered in 1928), which was used for both clothes and food. It famously had
a policy of accepting the return of unwanted goods, giving a full cash refund if the receipt was shown
no matter how long ago the product had been purchased. It had only recently adopted a 90-day
returns policy9, which still put it ahead of rival retailers, as most only offered a maximum 30-day
refund. The company put its main emphasis on quality but, for most of its history, it also had a
reputation for offering fair value for money. When this reputation began to waver, it encountered
serious difficulties. Marks & Spencer's belated switch to overseas suppliers undermined a core part of
its appeal to the public as a high quality British supplier.
Financial Information
Marks & Spencer's profits peaked in 1997 and 1998, as did its share price at over 650 pence per
share. At the time it was still seen as a continuing success story.
Marks & Spencer 10 year financial performance

8,500 1,400

1,200
8,000 1,000

£million
£million
800
7,500
600
7,000 400
200
6,500 0
1996
1997
1998
1999
2000
2001
2002
2003
Turnover Profit before tax 2004
Figure 1: Marks & Spencer performance 1996-2004
From 1997 to 2001, the company's share price fell by more than two-thirds to just over 200 pence per
share and its profits fell from more than a billion pounds in 1998 to £145 million in the year ending 31
March 2001. Post-2001, Marks & Spencer’s revenues stayed largely at the same level, with a
significant improvement in net profits while it was trying to catch up with its larger rivals.
First Shots
28 May – Green confirms he is interested in Marks & Spencer
Shortly after the announcement of the full year results, rumours started to spread that Green was
considering an offer for Marks & Spencer. This forced Green to confirm that he was interested,
expected to put a bid at the beginning of June and that an agreement in principle on the financing of
the deal had been reached with the banks.
Shareholders' reactions to Green’s potential bid were as varied as the investor base itself. Two
common themes emerged: first, existing management was not in a good position to defend itself
10
against the approach and, second, any bid would have to include a substantial cash element.
Although the share price before the announcement was 280 pence, it leapt almost 20% following the
announcement of the takeover approach even though Green had not yet indicated a price. Some
market participants commented that a bid would have to start at 400 pence per share and that it could
go as high as 445 pence per share.11
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Shortly after the announcement, Marks & Spencer hired Rothschild and Cazenove to advise on its
defence strategy alongside Morgan Stanley, which had been hired at the end of 2003.12 Sir Phillip
Green, on his side, had already hired Goldman Sachs and Merrill Lynch.
31 May – Marks & Spencer fires its chairman and CEO and to hire Stuart Rose as its new CEO
Under pressure from its institutional shareholders, the board of directors decided to fire the Chairman
and CEO. Vandevelde had announced his retirement a few weeks earlier but Holmes had clearly
failed to convince investors that he was capable of reviving Marks & Spencer or leading an energetic
defence of the retailer against Green.13 Under their pressure, the board of directors appointed Stuart
Rose as their new Chief Executive with immediate effect. Alongside him as interim Chairman was
Paul Myners, one of Britain's best-known corporate figures, who stepped up from a non-executive
board position.
On the same day, Green recruited Lord Stevenson to be his senior Non-Executive Director and to help
assemble a potential board. As one City figure said at the time, “That is a very smart move - no one is
better connected.”14 Lord Stevenson was the Chairman of HBOS, the recently merged Halifax and
Bank of Scotland group.

Background of Stuart Rose

Rose first joined Marks & Spencer in 1972, as a management trainee. He remained with Marks &
Spencer until 1989, when he joined the Burton Group where he was appointed the Chief Executive of
the Multiples Division in 1994. The Burton Group later demerged forming the Arcadia and Debenhams
businesses.
In 1997 he joined Argos as Chief Executive, where he was appointed to defend the company from a
takeover bid from the catalogue giant, Great Universal Stores (GUS). GUS did take control of Argos,
but Rose succeeded in negotiating an increased price for the retailer.
He then became Chief Executive of Booker plc, where he oversaw the merger of the company with
Iceland in 2000, after which he moved to Arcadia Group plc as Chief Executive, leaving in 2002
following its acquisition. Rose had turned around the fortunes of the Arcadia Group and sold the group
to Green for over £800 million, netting him around £25 million as part of the deal.
Immediate Actions Taken by Rose
According to the Financial Times, an investor supporting Green commented that, “Marks & Spencer
have done their bit with appointing Stuart, but there is nothing that we have seen that changes
anything from our point of view. Shareholders have to decide if they want cash and the potential
15
upside with us, or just the potential upside that Stuart offers.”
Rose’s first and urgent task was to defend the company from the advances of Green. On his first day,
Rose embarked on a series of changes. His message was clear: the best defence was sorting out
Marks & Spencer’s trading problems.16 To jump start his team, Rose brought with him his former
Arcadia colleagues Charles Wilson to head property, IT and supply chain, and Steve Sharp, who
would head marketing, store development and design.
According to Rose, previous management did not consider two important things: competition and the
fact that deflation was a very important factor in UK retail. “Management raised margins thinking that
Marks & Spencer stood for quality and customers would come anyway.” He said that he would
provide his full restructuring plan in six weeks:
 focusing on fixing the biggest problems, including the branded clothing

i
 making the business better at quick decision making and changing the corporate culture
 looking at the property portfolio to see how best to release the value tied up in itii
i
Marks & Spencer was well known for its very bureaucratic culture
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 improving systems, supply chain and retail process and operations
After his arrival, Rose brought in Citigroup, with whom he had close ties, to replace Rothschild in
working alongside Morgan Stanley and Cazenove in defending Marks & Spencer against Green’s
advances.
Rose also changed Marks & Spencer’s PR advisor to Tolchan Communications. Brunswick, the
previous PR adviser, had worked for Marks & Spencer for several years and before the bid had been
briefing the management of Marks & Spencer against Stuart Rose. With Rose now at the top, they
would have needed to change their tune. Rose commented that, “It was not going to work.”17
2 June – Green’s solicitors barred
On 3 June, Marks & Spencer won an injunction barring Green’s solicitors from acting for him in his
takeover attempt.18 In what was considered a highly unusual move, Marks & Spencer went to court to
block Freshfields Bruckhaus Deringer, Green’s law firm, from working on the deal because of an
alleged conflict of interest. It claimed Freshfields had an irresolvable conflict of interest due to:
 advising on the employment contract drawn up for George Davies, the founder of Next, who was

designing clothes for Marks & Spencer

 Freshfields' previous work for the retailer, including acting for Marks & Spencer in a legal battle
with William Baird, a former Marks & Spencer supplier

The court’s decision to remove Freshfields meant that Green had little choice but to instruct new
19
solicitors (Ashurst) to take his proposal forward.
According to Stuart Rose, “It was not a big deal, but for two to three days, Green was without a lawyer.
That gave us some breathing space.”20
The Battle
3 June – First approach at 340 to 360 pence per share
Following weeks of speculation, on 3 June, Green informed Marks & Spencer that he was considering
bidding for the company and would be offering:
 cash in the region of 290 to 310 pence per share, plus

 equity comprising 25 per cent of Green's Revival bid vehicle, valued at between 25 and 100 pence
per share. Revival Acquisitions Ltd was a company owned by Green and members of his family.
As part of the bid terms, Green requested that he be given access to confidential information and
stressed that he would not be making a hostile bid. He said 20 pence per share of the cash portion of
the offer, or £450 million, was conditional on Marks & Spencer providing details of its secret contract
with George Davies, who was behind the Per Una women's wear range.
Other conditions included confirming how well funded Marks & Spencer's pension schemes were,
what capital expenditure commitments it had, how trading had been for the past six weeks and the
board’s recommendation to shareholders to approve the offer. The ‘bid’ was a virtual bid - Green was
merely informing Marks & Spencer and announcing to the public that he was considering making a bid
on the terms announced (rather than making a formal bid).
It received a mixed response. eFinancialNews reported that one shareholder said that the terms
outlined by Philip Green had the makings of “a good first bid. Green hasn't put all his cards on the
table and has left room for manoeuvre. He'll have to go higher than 360 pence if he wants to
ii
Marks & Spencer’s property portfolio was last valued in 1998 at approximately £2.1 billion, but commercial property prices had
since soared and the portfolio was expected to be worth significantly more
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succeed.”21 Marks & Spencer’s board immediately rejected the takeover approach stating that it
significantly undervalued the company; many investors dismissed the approach as “underwhelming.”22
6 June – Green delaying threat (I)
The takeover panel asked Green for clarification about his statement that he would withdraw his bid if
it were referred to the Competition Commission. Marks & Spencer had been arguing that he would
then control 31% of the women’s lingerie market in the UK, which would be high enough to be referred
to the Competition Commission, whereas Green defined the market more broadly with a post-
acquisition 16% of the overall womenswear market, which would not be high enough to be referred.23
10 June – More changes at Marks & Spencer
Ten days into his job, Rose spearheaded further significant board and management changes. Two of
the board directors who had been with Marks & Spencer for more than five years were departing, as
well as the director in charge of clothing, homeware and store design. The role of the other senior
management members were either changed or shifted.24
According to Rose, changing the board and top management “…was an important thing to do. It was a

signal to indicate that we were serious.”25

12 June – Green delaying threat (II)

On 12 June, Green announced that he was considering delaying his bid for one year to see if Rose
could deliver on his promises. The announcement, while not without merit, was most probably
designed to scare investors into accepting the bid rather than gamble on whether Rose would be able
to turn the business around.

16 June – Second approach at 370 pence per share
On 16 June, Green came back with 370 pence per share offer in cash, or an alternative mix of cash-
and-equity of the same value. As with the first offer, the second offer was also informal.
Although the second offer had a premium of almost 40% over the pre-takeover share price and an
improvement of almost 15% on his first offer, it was again not very well received by investors and
analysts. Some investors argued that under Stuart Rose, the value of Marks & Spencer shares would
grow, considering the major cost savings and improvements identified.
Marks & Spencer again swiftly rejected the offer. The Financial Times reported that, “Mr Green's
revised offer was said to have been rejected by Marks & Spencer's board just two hours after it was
26
put forward.”
17 June – Green shows his other face
The day after announcing his second offer, Green had an encounter with Rose on Baker Street next to
Marks & Spencer’s headquarters. The Financial Times reported that, “The subject of much City
gossip, this at one point involved Mr Green seizing Mr Rose by the lapels and unleashing a string of
unprintable expletives. Many will say all this is just typical of Mr Green's rough diamond exuberance,
and that a man with a dislike of investment banks, and limited appetite for City convention, is a breath
of fresh air. And anyway, if he is prepared to pay enough for Marks & Spencer, and in cash, who cares
about his style?”27
Subsequent to this encounter, Rose was quoted saying that, “I'm walking around now with a pair of
dark glasses and a moustache on.”28
25 June – FSA launches an investigation into Rose’s trading in Marks & Spencer shares
On 25 June, the Financial Services Authority (FSA), the City of London's main regulator, launched a
formal investigation into trading in Marks & Spencer shares. The FSA were looking at unusual share
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movements and derivative trading in the month running up to 27 May, when Green announced his
plans to make a bid for Marks & Spencer.
The investigation was particularly focused on the purchase by Rose of 100,000 shares at a price of
276 pence a share on 7 May, the same day and just half an hour after he had a call from Green to
arrange a meeting to discuss Green’s plans. Rose maintained that he knew nothing of Green's
intentions until the meeting took place on May 12. When the FSA investigation was launched, the
share price stood at 362 pence, resulting in a paper profit for Rose of £86,000.
2 July – Pension deficit and the data protection incident
Green made attempts to meet the Marks & Spencer pension trustees to clarify the extent of the
pension liabilities. In a letter to the chairman of the trustees he wrote that determining the fund’s
liabilities was “absolutely key” and that, “We need to be clear on what the funding requirements are to
29
enable us to make a considered decision.” Green made it clear that this was a key issue if he were
to improve his current 370 pence a share offer. The issue was important as Marks & Spencer’s 2004
annual report showed that the pension fund had a deficit of £670 million, which would probably need
to be covered by the bidder.

As part of the share investigation by FSA, it emerged that Rose’s phone records had been accessed

without his knowledge. When he asked his phone operator for a record of his phone calls, the operator
replied that someone else had already asked for details on 23 June.

Rose's solicitor, Olswang, issued a series of disclosure notices (including one addressed to Green) on
30 June under the Data Protection Act. These required recipients to disclose any personal information
they may have on Rose and could reveal who gained access to his mobile phone records.30
When Green received his notice next day, he sent his bodyguard to a nearby telephone box on
Marylebone Road and asked him to return with two prostitute calling cards. He then wrote a letter to
Rose: “Dear Stuart, Please find enclosed the information that I have on you. Here's a picture of the
two girls that had dinner with you at Harry's Bar a few weeks ago. I enclose the £10 which they told
me to return to you. Philip.”31
6 July – The Takeover Panel forces Green to 'put up or shut up'
There was much speculation in the press regarding Green’s intentions. Marks & Spencer requested
the UK Takeover Panel to invoke a ‘put up or shut up’ clause.iii On 6 July, the Panel gave Green 28
days to make a formal bid (and announce the terms and conditions of a full offer) or walk away from
Marks & Spencer for six months. This announcement came one week earlier than Green was
expecting.
Marks & Spencer shareholders had been demanding clarity over Green's intentions and had indicated
they wanted a cash offer above 400 pence per share. eFinancialNews reported that one shareholder
said that, “It's time Green was forced to lay his cards on the table.”32
Green responded the same day to the UK Takeover Panel clause by repeating his demand for full
information on Marks & Spencer's pension fund, as the trustees of the pension fund were still debating
whether to meet Green.
7 July – Third and final approach at 400 pence per share
On 7 July, Green raised his offer to 400 pence per share cash, valuing Marks & Spencer at £9.1
billion. The offer also had an alternative of 335 pence per share in cash plus a 30% equity interest -
Revival Acquisitions. The offer, which was also informal as the two previous ones had been, was
conditional on its being recommended by the Marks & Spencer board and being able to carry out due
diligence.
iii
UK Takeover Code Rule 2.5 which requires the bidder to make a formal offer or walk away and not bid for another six months
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Green said the proposal, which was his third in the five weeks since he first announced his interest in
Marks & Spencer, was his last: “This is my final, final, final offer.”33 Green also announced that he had
the support of Marks & Spencer largest shareholder, the US-based Brandes Investment Partners,
which owned 11.7% of Marks & Spencer. As well as Brandes, Green claimed that he had the
conditional support of other shareholders bringing the total share of shareholders from which he had
support to 34%.34
This time it took Marks & Spencer’s board of directors one day to reject Green’s final offer.
Nonetheless, this final offer was seen as a more serious offer by some of the largest Marks & Spencer
shareholders. David Cumming, Head of UK Equities at Standard Life Investments, a top ten Marks &
Spencer shareholder, said “The proposed bid merits consideration,” while Tony Nutt, a fund manager
at Jupiter Asset Management, added “400p is a more meaningful offer. The onus on Marks & Spencer
is to demonstrate that the business is seriously undervalued at that level.”35
Effectively, this put the focus on Stuart Rose, who was due to announce his plans for restructuring
Marks & Spencer in a few days. Rose was expected to demonstrate that he could increase the value
of Marks & Spencer above the 400 pence a share offered by Green.

12 July - Marks & Spencer pension trustees require Green to inject £785 million per year

The debt level that Marks & Spencer was to assume following the takeover by Green was of great
concern to the pension trustees. They argued that a company with higher leverage meant more risk
and, to compensate for this, the trustees might need to re-balance the pension plan portfolio by
shifting more assets into bonds. This would effectively decrease the return on assets and
subsequently require higher contributions from Marks & Spencer.

They estimated that following a Green acquisition of Marks & Spencer, the company would need to
36
contribute up to £785 million per year to the pension plan.
13 July – Rose announces Marks & Spencer restructuring plans
On 13 July, Rose held an analyst meeting to announce the much-anticipated restructuring plan. The
three-year plan was designed to demonstrate that the Marks & Spencer board had not been
capricious when it decided that Philip Green's proposed offer significantly undervalued the company.
It was based on ‘back to basics’ principles. Later Rose commented on this, “We did not outline a
strategy because the previous management was always talking about the strategy. I put out a plan.
We concentrated on some principles. Principles that had worked for the company for the last 100
years. Principles addressing what shoppers want: decent products, decent shops, decent services. In
order to give them this we concentrated on five core values: quality, value, innovation, service and
37
trust.”
The plan also included
 annual cost savings estimated at £320 million

 disposal of part of Marks & Spencer credit card business to HSBC for £762 million
 returning cash at 100 pence per share to the shareholders, a total of more than £2.3 billion. The
cash would come from the disposal of the credit card business and also from additional borrowing
to be covered by the revaluation of the Marks & Spencer property portfolio by £1.4 billion to £3.6
billion
The Financial Times estimated that the improvements would allow Marks & Spencer to be valued at
approximately 420 pence a share (including the return of cash of 100 pence a share), which was 20
pence a share more than Green’s final offer. Their estimate assumed that the cost savings announced
by Rose would be achieved, but excluded any improvement in revenues.
Shortly after Rose announced the restructuring plan for Marks & Spencer, Standard Life announced
their support for the retailer. This was a big blow for Green, as the Head of UK equities at Standard
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Life, David Cumming, was highly respected in the City.38 This left many Marks & Spencer
shareholders wondering whether to follow suit or go against Cumming’s judgement.
Also on 13 July, the UK Takeover Panel forced Green to admit that buying Marks & Spencer could
end up costing him as much as £11.1 billion. This was £2 billion more than his final 400 pence a share
offer which valued Marks & Spencer at £9.1 billion. The increase was the extra amount it would cost
him to buy out the bondholders if he made a formal offer for the retailer and if the offer were
successful. Green was under no obligation to buy the bonds as they did not have a change of control
clause,iv but the Takeover Panel rules say a bidder must have the funds to do so.39
Green walks away
14 July – Marks & Spencer Directors refuse Green’s due diligence requests
At the annual meeting on 14 July, Marks & Spencer directors vowed that they would not back down on
their refusal to open their books to Green, even though the billionaire entrepreneur claimed that one-
third of the retailer's shareholders would back such a move. They argued that Green’s Bhs and
Arcadia were direct competitors to Marks & Spencer, so opening the books would mean disclosing
commercial secrets to a competitor.

15 July – Green withdraws informal offer

Since Green had announced his third informal offer as final, he could not increase the offer as the
rules of the UK Takeover Panel require that a bidder cannot increase an offer further during the next
six months, unless the company receives another offer from a third party.
40
On 15 July, Green announced that he was withdrawing his 400 pence a share offer.
iv
A ‘change of control clause’ typically requires the repayment of bonds in full if there is a change in control of the business
through, for example, an acquisition. Such a clause would allow the bondholders to renegotiate the terms of the bonds to
compensate for any change in risk from a new owner or new capital structure (such as greater leverage).
9
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Exhibit 1: Deal Timeline
3 May
7 May/28 April 9 May
Green meets Rose to discuss the takeover M&S chairman to retire
24 May 25 May
28 May
M&S announces poor financial results
Green confirms preparation of a £8bn+ bid
30 May
31 May M&S fires its chairman and CEO
Green appoints Lord Stevenson as a senior non-
31 May
executive director 31 May M&S appoints Stuart Rose as its new CEO
2 Jun
Green’s legal team barred in the takeover attempt 2 June
M&S changes its financial and PR advisors
3 Jun
3 Jun
Green offer cash and equity valued 7 Jun M&S rejects Green’s first offer
at 340-360 p per share, including his own £1.1bn
9 June

Significant boardroom and management changes

14 Jun

14 Jun
Green has ruled out a £9bn bid
16 Jun
Green offers 370p per share 17 Jun
M&S rejects Green’s second offer
21 Jun
25 Jun
FSA launches investigation into

Rose’s share trading
28 Jun
7 Jul 5 Jul
Green back with 400 p per share deal 6 Jul
UK Takeover panel forces Green to ‘put
8 Jul up or shut up’
Largest shareholder to support Green’s offer 8 Jul
12 Jul M&S rejects 400p bid, but pressure grows
12 Jul
15 Jul HSBC to buy M&S's credit card business for £762m
Furious Green walks away 13 Jul
• Rose announces a new strategic plan
19 Jul • Standard Life to support Marks & Spencer
• M&S pension trustees require Green to inject £785
per year
• M&S to return £2.3bn to investors
• Takeover panel to require Green to come up with
16 Aug extra £2bn to finance the debt refinancing
10
Exhibit 2: Share price
For the period 1 January 1999 to 31 December 2004

For the period 1 January 1999 to 31 December 200441
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Exhibit 3: Financial Statements42

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12
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13
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1
CSFB equity research report, 8 April 2004, ‘Unfortunately we have a low degree of confidence that management will deliver
them.’
2
The Business (2004) ‘Marks & Spencer’, 19 April
3
Voyle, S. (2004) ‘Vandevelde to leave top job at Marks and Spencer’, Financial Times, 9 May
4
Voyle, S. (2004), ‘Marks and Spencer investors concerned about Vandevelde successor’, Financial Times, 10 May
5
Roger Holmes, ‘Chief Executive’s review 2004’, Marks & Spencer website
6
Voyle, S. (2004), ‘Doubts over plan for Marks and Spencer revamp’, Financial Times, 26 May
7
CSFB Research, 28 May 2004
8
Marks and Spencer website, ‘Our history’
9
Marks & Spencer website, ‘Refund policy’
10
Smith, A. (2004), ‘Investors want a substantial cash element’, Financial Times, 28 May
11
Flood, C. (2004), ‘Blue-chip index gains on Green's plans for Marks and Spencer’, Financial Times, 28 May
12
Adams, J. (2004), ‘Green's Marks and Spencer bid could trigger Europe's largest junk bond’, eFinancialNews, 28 May
13
Voyle, S. (2004), ‘Marks and Spencer fires top team to fend off Green bid’, Financial Times, 31 May
14
Voyle, S. (2004), ‘Green appoints a Mr Independence’, Financial Times, 31 May
15
Voyle, S. (2004), ‘Retail group bows to shareholders and begins fight-back’, Financial Times, 1 June
16
Voyle, S. (2004), ‘Rose begins to blossom at Marks and Spencer’, Financial Times, 2 June
17
Ibid.
18
Parker, A. (2004), ‘Green legal team hobbled by injunction’, Financial Times, 3 June
19
Sherwood, B. (2004), ‘New solicitors needed for proposal’, Financial Times, 3 June

20
Interview with Stuart Rose, 29 September 2006
21

Meehan, C. (2004), ‘Marks and Spencer rejects Green's £9bn bid terms’, eFinancialNews.com, 3 June
22
Pretzlik, C. (2004), ‘Marks and Spencer rejects £7bn-plus approach’, Financial Times, 4 June
23
Marks & Spencer Operational Review, 12 July 2004

24
Pretzlik, C. (2004), ‘Shake-up at Marks and Spencer adds doubt to Green's £7bn move’, Financial Times, 10 June
25
26
Pretzlik, C. (2004), ‘Marks and Spencer rejects Green's revised takeover offer’, Financial Times, 16 June
27
Dickson, M. (2004), ‘City gets sniffy over Green's bullishness’, Financial Times, 8 June
28
Harris, C. (2004), ‘Tender petal’, Financial Times, 10 June
29
Garrahan, M. (2004), ‘Green waits on Marks and Spencer trustees’, Financial Times, 5 July
30
The Daily Telegraph, ‘Green has denied that he has employed any corporate private investigators’, 30 June 2004
31
The Daily Telegraph, ‘Green replies to Rose data protection inquiries with prostitutes calling cards’, 2 July 2004
32
Meehan, C. (2004), ‘Takeover Panel forces Green to “put up or shut up”’, eFinancialNews, 6 July 2004
33
Manchester Business Online, 7 July 2004
34
Batchelor, C. (2004), ‘Rose goes on a charm offensive’, Financial Times, 16 July 2004
35
Burgess, K. (2004), ‘Green makes “final” offer for Marks and Spencer’, Financial Times, 8 July
36
Buckley, S. (2004), ‘Scores of investors and many a housewife are counting on Rose’, Financial Times, 12 July
37
38
Tucker, S. (2004), ‘Standard Life decision is a big blow for Green camp’, Financial Times, 14 July
39
Costello, M. (2004), ‘Panel forces Green to put up extra £2bn in Marks and Spencer fight’, eFinancialNews.com, 13 July
40
eFinancialNews, (2004), ‘Furious Green walks away from Marks and Spencer bid’, 15 July
41
Wall Street Journal
42
2004 Marks & Spencer Annual Report
15

M&amp;S Case

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307-149-1

The Battle for Marks & Spencer

The Battle is Set

25 May 2004 – Marks & Spencer announces poor 2003/2004 results

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Taught by Scott Moeller, from 21-Apr-2020 to 21-Oct-2020. Order ref F381722.

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Background of Sir Philip Green

© 2010 S Moeller, Cass Business School

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Overview of Green’s acquisitions in the UK retail sector

1986 Sale of Jean Jeanie franchise after six months of ownership

1994 Acquired Owen Owen department store chain

1997 Acquired Shoe Express from Sears for £8.3 million

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2000 First approach for Marks & Spencer

Background of Marks & Spencer

Marks & Spencer 10 year financial performance

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Turnover Profit before tax 2004

Figure 1: Marks & Spencer performance 1996-2004

28 May – Green confirms he is interested in Marks & Spencer

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but Rose succeeded in negotiating an increased price for the retailer.

Immediate Actions Taken by Rose

 focusing on fixing the biggest problems, including the branded clothing

 improving systems, supply chain and retail process and operations

2 June – Green’s solicitors barred

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3 June – First approach at 340 to 360 pence per share

 cash in the region of 290 to 310 pence per share, plus

6 June – Green delaying threat (I)

10 June – More changes at Marks & Spencer

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to turn the business around.

16 June – Second approach at 370 pence per share

17 June – Green shows his other face

2 July – Pension deficit and the data protection incident

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6 July – The Takeover Panel forces Green to 'put up or shut up'

7 July – Third and final approach at 400 pence per share

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subsequently require higher contributions from Marks & Spencer.

13 July – Rose announces Marks & Spencer restructuring plans

 annual cost savings estimated at £320 million

Green walks away

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Exhibit 1: Deal Timeline

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FSA launches investigation into

M&S Case

M&S Case