Shareholders in Marks and Spencer Group plc looked to be in a win-win situation yesterday after the firm made Stuart Rose chief executive to fight a possible nine billion-pound bid from old sparring partner Philip Green.
Analysts think that 55-year-old Ms Rose, who has long coveted the top job at M&S, will either turn the company's fortunes around or - going by his track record - extract a higher bid price. Some press reports have estimated the bidding could go as high as £10 billion.
Shares in Marks & Spencer extended last week's 28.5-per cent rally to be up 1.8 per cent at 366p by midday, valuing the firm at £8.2 billion.
"Either way, can investors lose?" said one analyst. M&S has come out fighting after retail tycoon Mr Green said last week he might bid for the ailing giant as early as today. It ditched embattled chief executive Roger Holmes on Monday along with Chairman Luc Vandevelde and appointed well-regarded retail executive Stuart Rose as the new CEO, with Paul Myners becoming interim chairman.
"Stuart Rose coming in as CEO is a major coup," said Tony Shiret, retail analyst at Credit Suisse First Boston. "He can do anything Green can do in terms of the supply chain and has more of a track record in terms of driving sales forward."
The retailer's sales are falling and investors lacked confidence in Holmes being able to stop the loss of its already pared down 11 per cent clothing market share.
Ms Rose turned around the Arcadia chain, including Top Shop and Dorothy Perkins, before selling it to Green in 2002 and squeezing out a higher price even after Green's final offer. Before that he ran food wholesaler Booker where he arranged a merger with Iceland and general retailer Argos where he won a higher bid price from GUS.
Both men have become friends and Mr Green talked to Ms Rose about helping him run food retailer Safeway when he bid for that company last year.
The fight for M&S promises to be gripping. Mr Green, Britain's fourth richest man, sees M&S as the ultimate challenge and Ms Rose has always wanted to return to M&S to try and restore the chain to its former glory.
"I didn't take this job to sell the business," he said. Mr Green's offer, which will be in cash and shares, is expected to be worth up to 400p a share or nine billion pounds. He previously looked at M&S four years ago but backed down after a bruising publicity war. He is seeking a recommendation for his bid from the company's board.
"M&S has reacted very quickly. It means Philip Green is less likely to get an agreement from the board, though it was debatable whether he was ever going to," Mr Shiret said, saying the shares could find support around 340p if the bid fails.
Brewin Dolphin Securities, which has a one per cent shareholding in M&S thinks a 400p bid would be needed to tempt shareholders, including a cash element well over 50 per cent.
"Mr Green will have to offer shareholders a significant premium to persuade them to back him rather than Stuart Rose," said analyst Tim Green.
Institutions hold 80 per cent of M&S shares with 311,477 private individuals making up the remainder.
"I think shareholders should hang on," said Rupert Trotter analyst at ISIS Asset Management, owner of one per cent of M&S stock, who predicts a bid price of 400p is achievable.
"This situation allows for a much more credible defence by the company and with Stuart Rose on board there is the prospect of an accelerated recovery."