“As shoppers prepare for a black Friday spree, the bargain hunt for good value UK companies continues for private equity firms.
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The rumour mills are now grinding around a possible bid by Apollo Global Management for Marks and Spencer Group Plc (LON:MKS), sending shares 3% higher in early trade. 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.
It does demonstrate how the UK is still near the top of private equity shopping lists, with valuations of UK listed companies dragged down while the economy continues to reverberate with problems caused by the pandemic and Brexit after-effects."
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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