High street retailer Next was hit earlier this week by a sell note from Panmure Gordon. Today the focus was a little different: would it make sense for Marks & Spencer to take over one of its high street rivals?
That's the suggestion being punted by Tony Shiret at Credit Suisse. He says: "We have concluded that investors do not fully appreciate the extent of the structural problems facing Next. In addition to known problems with women's wear it faces major issues in i) children's wear - where it is UK number one; 2) large store performance as well as small; 3) achieving scale in its home business; and 4) the credibility of its price positioning.
"There have been only a few signs that Next's responses to its problems have been successful. We continue to be concerned by the weak execution and the extended time period over which management is addressing the range of issues it has
identified."
And so to one possible solution: "In this context we have reviewed possible takeout scenarios and in particular considered the merits of a scenario in which Next is bought by Marks & Spencer. M&S have never publicly expressed an interest in Next, but we believe this would significantly enhance M&S's strategic prospects. We believe M&S could clearly pay a significant premium for Next with the benefit of synergies and the use of some of the enlarged group's borrowing capacity."
Makes a change from Marks & Spencer merging with Sainsbury. Next has edged ahead 3p to £13.08, compared to Shiret's £20 target, while M&S slipped 2.5p to 399.5p.
Elsewhere the leading index has slipped back, with Yell down another 12p to 230.5p after yesterday's growth warning from US directories rival RH Donnelley. Bear Stearns has cut its recommendation on the company from outperform to peer perform.
Banking group HBOS has fallen 21.5p to 613.5p on continuing concerns about its exposure to various problem loans, while outsourcing specialist Capita is 27.5p lower at 655p on profit taking after its in-line results.
So the FTSE 100 is currently 59 points lower at 5906.7.
A tip of the hat to industrial group Stanleco for an inspired bit of bandwagon jumping. The current anti-plastic bag campaigns have prompted the company to puff itself as "the only bioplastics manufacturer headquartered in the UK". Quite why this needed to be a regulatory news announcement is unclear, but it seems to have worked. Stanleco is up 34% to - wait for it - 0.35p.
