Shares in M&S spark on takeover rumours

According to The Sunday Times, Apollo Global Management has been "running the rule" over the FTSE 250 retailer, which last week posted better-than-expected interim results and upped its full-year profit guidance.

Citing unnamed City sources, the newspaper said Apollo considered M&S a "bargain" as its shares were undervalued. In particular, Apollo believes the market is overplaying the impact of the pandemic on the stock and under-appreciates its 50% stake in Ocado’s retail business.

However, it remains unclear if recent gains in the share price have dampened Apollo’s interest, the report acknowledged.

Shares in M&S, which by 1000 GMT were trading 3% higher at 248.7p, have put on 40% over the last month.

Nick Bubb, retail analyst, noted: "If Apollo is serious about bidding for M&S, they’ve left it a bit late, given the big recovery in the share price."

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "It’s unlikely to be lingerie sales which have made M&S an attractive prospect, instead its food aisles and in particular the tie-up with Ocado which will be the allure.

"Apollo has flirted with other acquisitions in the UK grocery sector, losing out in its quest for Asda, and then pulling out after making advances for Morrisons. Given its thwarted attempts so far, there is growing expectation that the group may make an offer for the company, particularly given that food was such a star performer in the last set of results.

"Apollo will be weighing up the future value of Marks and Spencer’s e-commerce tie-up with Ocado, and speculation that its success so far may lead the retailer to buy out Ocado’s 50% share indicates the weight of expectation about its growth prospects. However, shares have surged more than 27% since those impressive results and if the price continues to climb, there is a chance Apollo may turn into more of a reluctant suitor."

Neither Apollo nor M&S have commented on the report.