Spurned M&S suitor Green won't be beached for long

Philip Green may be "heading for the beach" to lick his wounds after the failure of his second bid campaign in four years for Marks & Spencer, but no one expects the retail tycoon to work on his tan for too long.

Not only does Mr Green have some of the most successful retailers in Britain to run, friends say he has not given up on the UK's top clothing retailer. And if he cannot get M&S, there are other targets to shoot for, and other battles to fight.

Richard Ratner, a friend of Mr Green's and retail analyst at brokers Seymour Pierce, said the billionaire entrepreneur would certainly be keeping a predator's eye on M&S Chief Executive Stuart Rose's performance.

"I don't think he'll move after six months, because Mr Rose has said he can't turn things round in that time. But after 12 months it could be another story," Mr Ratner said.

One source close to the Green camp agreed. "Mr Rose may have won the battle, but he may not have won the war. Mr Green has made two bids; it could be a case of third time lucky," the source said.

UK takeover law prevents Mr Green from making another offer for M&S for the coming six months, unless the board performs a remarkable volte-face and recommends his 400-pence-per-share bid, or a second suitor comes into play.

Although short-term investors such as hedge funds would have been among the sellers of M&S shares on Thursday as the stock fell over five per cent to 344-and a quarter pence, financial sources said others would sit on their holdings for the time being.

"Some of them (hedge funds) are buying it because its become a restructuring play," one source said.

This is partly a wait-and-see strategy, since Mr Rose has yet to announce the price of a share tender offer planned for September as part of his 2.3 billion cash payout to investors. But there is likely to be a takeover premium still in the price.

Mr Green confessed on Wednesday to being tired and in need of a holiday following the arduous seven-week battle. But the combative owner of Bhs department stores and the Arcadia fashion chain promised Rose he would not have an easy time of it.

"They are going to have us breathing down their neck in every street and every shopping centre in the UK," Mr Green said. "Then we'll see who is the best retailer."

Richard Hyman, chairman of retail consultants Verdict, said this was not just the reaction of an angry and disappointed man.

"I think he is pragmatic. He calculated there is no point going on, but he's invested a hell of a lot of emotion in this. Philip is the sort of chap who tends to say what he means. He's certainly not going to take his foot off the competitive pedal."

Although Mr Green's stores cater for a younger and more price-sensitive customer group than M&S's core 35-plus constituency, that does not mean his famed ability to push down prices will be a blunt weapon in the battles to follow.

About 11 million British adults visit a Marks & Spencer store each week, according to Verdict, and a significant proportion of these will also shop in stores owned by Mr Green, which include Top Shop and Dorothy Perkins.

Mr Green may choose to set his sights on another bid target. Last year he approached struggling supermarket group J Sainsbury Plc with a £6.4 billion offer, but his real expertise is in non-food retail, and he is unlikely to revisit a food seller whose competitive position has worsened since then.

There may be other bid targets, but the iconic if tarnished Marks & Spencer brand remains the crown jewel of British retail, matched only in recent years by rapidly expanding food retail market leader Tesco.

Despite Mr Green's disappointment, the arch-entrepreneur has certainly forced a badly needed change of management and direction at M&S. And he may yet return to reap the benefits of a bid campaign that is, for the moment at least, thwarted.

"He's proved he can raise the money, and he's set the agenda for M&S for the next six months and beyond," Mr Hyman said, and one source close to the situation agreed.

"It could be quite tough for Rose, because Mr Green will be sitting there, watching and waiting. So there is a very vulnerable time to come in the next six months or so."