Increased M&A speculation on the High Street boosted the general retail sector higher on Monday, with department store Marks & Spencer (M&S) surging after a rumoured takeover bid by Qatar.
rose as much as 9.0% in early trading after The Sunday Times reported that the Qatar Investment Authority, which already owns high-end store Harrods and a 26% stake in Sainsbury, was said to be assembling a consortium of private-equity investors and had spoken to banks about financing a potential offer.
The offer was thought to be for a price of 500p a share, valuing the company at £8.1bn.
However, though sources close to the sovereign wealth fund denied the rumours (Reuters), the stock held on to gains and was trading up 7.17% at 399.2p. A series of disappointing trading updates are thought to have left the company vulnerable to a takeover bid over the last few months and so the market was hoping that a bid may still materialise.
"The retailer has been the target of a bid in the past at 400p per share from Philip Green at the beginning of the decade but with the shares having gone nowhere in the last few years, a great deal of value is still to be unlocked from the substantial freehold property portfolio and the huge cashflow generated," said Ronnie Chopra, the Head of Strategy at Tradenext.
"With borrowing costs very low, now is a great time to pounce on this high street bellwether while shares languish around 400p."
Other retailers including Darty, WH Smith, Carpetright, Next and Ted Baker making making gains today.
Shares in Argos and Homebase owner Home Retail were also performing well today, up 1.29% at 157p, after Investec lifted its target price for the stock by a half from 115p to 173p and reiterated its 'buy' rating.
While many have taken a cautious view on the stock on the back of uncertainties at its struggling Argos chain, Investec analyst Bethany Hocking has labelled the business as "revolutionary".
"'Click and collect' is emerging as the channel of choice for UK shoppers, and an Argos store, which is in essence an extended 'click and collect' hub, is therefore ahead of its time, in our view. Almost half of Argos sales were multi-channel in FY12, and a 'check and reserve' order is intrinsically the most profitable for Argos. Stores are highly efficient, and set up to process single items, unlike the majority of retailers."
She said that while the valuation for Homebase remains "full" for now, a transformation plan at Argos could drive material upside which is not yet captured in the current share price.
Top performing sectors so far today
General Retailers 2,130.81 +1.68%
Mobile Telecommunications 4,343.24 +1.38%
Oil Equipment, Services & Distribution 25,223.04 +0.61%
Household Goods & Home Construction 9,921.90 +0.36%
Aerospace and Defence 4,660.83 +0.23%
Bottom performing sectors so far today
Life Insurance 5,836.48 -2.03%
Mining 18,850.98 -1.64%
Industrial Metals & Mining 2,442.18 -1.49%
Health Care Equipment & Services 4,129.01 -1.44%
Banks 4,954.19 -1.35%