The battle for Marks & Spencer (M&S) ended abruptly last Thursday evening when Philip Green told Cazenove’s David Mayhew that he was pulling out, no doubt with a few expletives thrown in.
Green and M&S’s financial adviser, Cazenove, had been in almost constant contact since the entrepreneur phoned M&S chairman Paul Myners at half past one to make clear he wanted a board recommendation and access to due diligence by the end of the day or that was it.
After the last Mayhew call, the M&S board and its advisers, which also include Slaughter and May, Citibank and Morgan Stanley, spent the next few minutes frantically checking the regulatory news service on their Blackberries to see if Green really meant it. They were stunned to discover that he did, having presumed the retailer was bluffing.
Now the dust has settled, the question is, was Green roundly beaten on tactics by M&S and Slaughters and the other advisers? Or did the retailers’ board deprive shareholders of an opportunity to make up their own mind?
Green has been outspoken about his disgust of the treatment he received at the hands of the M&S board. His lead solicitor Chris Ashworth of Ashurst made just one comment to The Lawyer saying: “Clearly the board, the advisers and Slaughter and May achieved their objective in blocking Philip, but was it the right decision for the interests of the shareholders, many of whom had indicated they wanted to proceed with due diligence?”
Although Slaughters declined to comment on any other aspect of the deal, Andy Ryde, who led for M&S along with Nigel Boardman, countered: “Green’s advisers will no doubt be asking themselves why they allowed Green to box himself in by choosing to make his offer dependent upon a recommendation and capped it at 400p. This prevented him from putting the offer direct to M&S shareholders.”
Most of the press has come down on the side of Philip Green – after all, the role of an outsider fighting against the City establishment makes good copy, but then it’s one hell of an outsider who has the odd billion in his back pocket and Goldman Sachs’ principal finance group on his side.
You can make up your own mind, but here are the thoughts of one of the City’s best-connected and longest-serving M&A stars: “I would always advise any board that, unless an indicative offer like this was so good you had to bite their hands off, why on earth would you accept an offer like this on a de facto hostile basis?”
He goes on to explain that, had the board accepted the offer with the restriction that Green would never go above 400p a share, the only way the price could ever have gone was down if Green found something he didn’t like in the due diligence. The board would have made a public statement that M&S was up for sale and given Green the whip hand.
Perhaps Green was constrained by his financiers, or perhaps his tactics were wrong, but there’s one thing even the opposition are clear on: in terms of what the M&S board wanted, Boardman and Ryde played a blinder.
|How the bid tactics worked|
31 May: M&S appoints Stuart Rose. If Green had got in before this, he would have won. Green then had to throw doubt on whether Rose could deliver.
1 June: Slaughter and May applies to the High Court to injunct Freshfields from advising Green because of the magic circle firm’s role in advising M&S on the George Davies contract, a central part of the takeover battle. The injunction is granted and upheld by the Court of Appeal, a turning point for law firm conflicts policy. A dangerous time for Slaughters – if the injunction was turned down, relations with Freshfields could have been even worse than if it had succeeded.
3 June: Ashurst officially replaces Freshfields as Green’s adviser. Ashworth and co did well to pick up the client ahead of competition from Lovells, but never really had the chance to shine.
28 June: FSA announces it is investigating trades made in the run-up to Green’s bid. Rose and various City players connected to Green are questioned. On 8 July Rose is cleared by the FSA.
30 June: Rose, whose phone bills and mail were tampered with by persons unknown, instructs his lawyers to send out data protection notices to Green, Goldman Sachs and private investigators at Kroll. There is no implication that any of the three were involved in anything illegal or improper. This is the first time the tactic has been used in a major M&A deal. Control Risk Group (CRG), a rival of Kroll’s, has responded already, but Kroll has not yet replied to the notice, which requires a timely response. Kroll and CRG declined to comment.
8 July: Brandes, with 11.7 per cent shareholding, comes out in support of Green. With the support of the hedge funds it looks like he could win out.
14 July: Green withdraws. Slaughter and May confirms its reputation as the UK’s hottest M&A advisers. However, even though Boardman’s kids might buy the odd thing at Top Shop, it’s unlikely you will see them on Green’s payroll any time soon.