Rose-Tinted Spectacles or Green Around the Gills

Money Week

The $16.8 billion dollar battle for Marks and Spencer is in full swing. Britain’s most notorious retail predator is stalking Britain’s most widely recognized retailer. The saga is turning into one of the most thrilling and epic takeover battles ever witnessed in the City of London.

Until last month, Stuart Rose, CEO of M&S, the “man for whom the word ‘smooth’ could have been invented”, and his irascible rival Philip Green appeared to be “best buddies”, said The Business. But thanks to the battle over M&S, Rose is unlikely to get an invite to Green’s next lavish toga party.

Their friendship “seems to have bitten the dust” owing to Rose’s desire to be the top man rather than Green’s “gopher”, said The Irish Times. Shortly after the newly installed Rose rejected Green’s first bid, the two reputedly “almost came to blows” outside M&S’s headquarters in Baker Street, with Green grabbing Rose by the lapels and berating him for joining M&S rather than his bidding team. Green feels his “chum” lied to him, said Patience Wheatcroft in The Times.

Despite having been approached by M&S, Rose “dismissed any thoughts that he might be talking to the company” at a meeting with Green just days before Rose was named as the new chief executive.

This doesn’t exactly “win him an award for loyalty”. Just as well, then, that Green and Rose didn’t bump into each other when they were quizzed by the FSA on the same day this week, said Neil Collins in The Daily Telegraph. There might have been another altercation, and “who knows what might then have happened” to Rose’s immaculate suit?

Until last week, the battle for M&S appeared to be going Stuart Rose’s way, amid a consensus view that Philip Green’s second indicative offer of £8.4bn was too low. But now Rose is at the center of an investigation by the Financial Services Authority into suspected insider dealing in M&S shares in the run-up to Green’s bid announcement on May 26. Rose scooped up 100,000 shares on May 7, three weeks before Green announced his intention to bid and the same day Green telephoned to ask him to a meeting on May 12 (at which he outlined his bid plans), said Heather Connon in The Observer.

Other investors “making a killing” from share purchases include retail entrepreneur Tom Punter, a former colleague of Green’s, and Michael Spencer of ICAP, with the latter’s purchase occurring the day after a 10 May meeting with Rose. Meanwhile, said Gordon Rayner in the Daily Mail, Rose is embroiled in a row with Green’s adviser Goldman Sachs now that an alleged conversation between Rose and a Goldman client, in which Rose supposedly discussed the takeover – thus breaching a confidentiality agreement with Green – has hit the newspapers.

Throw in claims that Rose’s phone records may have been accessed illicitly, and it’s no wonder the Marks saga has “gripped the City like nothing for years”. Rose will “rightly be cleared” of any wrongdoing, said Neil Collins in The Daily Telegraph. Green has agreed that M&S was not mentioned in the phone call of May 7, so this isn’t a case of knowingly buying shares with inside information. But Rose has still offended the “spirit” of the rules, said Martin Dickson in the FT. The world of top retailers is a small one, “where everyone knows each other’s predilections”, and given Green’s previous tilt at M&S, an educated guess that another go was on the cards hardly required “psychic powers”. Rose’s guess was based on “more education than is available” to the general public and his “bad judgment” will cost him goodwill.

The tarnishing of his reputation could affect the outcome of the bid battle, said Hugo Dixon on Breakingviews.com. After all, Rose had hitherto looked a better bet to run a public company than Green, as much of the City deemed the latter “a bit spivvy”. Now investors will be thinking the same of Rose.

“I couldn’t live without MoneyWeek,” says John Rose, CEO of Rolls Royce. This unique magazine studies the world’s most knowledgeable and sophisticated financial advisory services, so you don’t have to. MoneyWeek also goes direct to leading investors and professional analysts, to uncover where they’re putting their money right now – and why.