Marks & Spencer, who's up for a bid? Should they be looking at Sainsbury?

When it was reported that banks were recently looking at the possibility of UK High Street icon Marks & Spencer as a potential takeover target, it was thought they might just be fishing for business.  There was some talk of a potential private buyout, but no names were mentioned.  Do we now have that name?

ADVFN market report quoted from Bloomberg;

Shares in Marks & Spencer jumped on Friday afternoon on rumours that private equity titan CVC Capital Partners is considering a takeover offer for the High Street group. It is thought that CVC is looking at an bid and has approached executives both inside and outside the firm “about a possible management role under private equity control,” according to Bloomberg which has spoken to unnamed sources close the matter.

Well, I'm not sure that Bloomberg actually went that far.  It seems that a bid was considered at some time in the past, but is not currently being pursued.

CVC Capital Partners Ltd. has explored taking Marks & Spencer private as the U.K.’s largest clothing chain’s sales slump amid a lack of demand for its fashions, people close to the matter said.

CVC approached executives both inside and outside the company about a possible management role under private equity control, said the people, who declined to be identified as the talks were confidential. The buyout firm has not moved beyond a preliminary examination of the U.K. retailer and is not currently thought to be pursuing a bid, the people said. 

Interesting that Bloomberg goes on to say;

A buyout of Marks & Spencer may be hampered by the 5.7 billion-pound ($9 billion) market value of the retailer, its debt and pension liabilities as well as the need to restructure the company, whose general merchandise sales are underperforming the market.

In other words, they think it's too expensive?  Well, the market seems to push the price up further on rumour of a bid so they seem to think it's cheap or that one bidder might result in someone else being interested.  It's probably fair to say that the company isn't likely to be sold for anything near £5.7 billion, that a buyer might need much deeper pockets to take it private despite the negative aspects of debt and pension liabilities.

However, perhaps the most interesting addition to this story is the potential price that CVC seemed to be prepared to pay for Sainsbury back in 2007.

CVC attempted to buy J Sainsbury in 2007 but was forced to scrap the 10 billion-pound offer after the private-equity firm’s partners walked away and the Sainsbury family and pension trustees opposed plans to sell property assets.

Sainsbury has a market cap of £6.2 billion today after 3-4 years of a steadily falling share price despite the company producing decent results.  Sainsbury looks like the bargain here if there is one and there seems to be plenty of room for the price to go higher if the market mood towards food retailers were to change.

http://www.bloomberg.com/news/2012-08-24/cvc-said-to-have-considered-offer-for-marks-spencer.html