Will Green walk away from M&S?
By Anthony Hilton for MailOnline
Updated: 19:00 EST, 31 May 2004
STUART ROSE has always wanted the chief executive's job at Marks & Spencer but he surely cannot have foreseen it would be the threat of a bid from one of his best friends, Philip Green, that prompted the board to knife Roger Holmes and offer him the job. The M&S board, which for so long has been asleep on the job - even back in the days when Sir Richard Greenbury ran the empire - has acted with what for them is astonishing speed. And over a holiday weekend as well!
It shows how threadbare the group's strategy had become. The board seems to have realised that unpopular though Green may be with huge swathes of the City, he has forgotten more about retailing than most of them ever knew, and was therefore a much more appealing potential head of the group than their own man.
Last week they were in no shape to mount a credible defence against a Green bid other than on grounds of price. This week, with Rose and the additional news that Paul Myners has been recruited to replace the bored and uninspiring Luc Vandevelde as chairman, they at least have a team worth listening to. One is tempted to say that most of the nonexecutive element of the M&S board should follow Holmes and Vandevelde out of the door.
These are the very people who only a few days ago were refusing to believe Rose had anything to offer the group. They did not want him as chairman and were content to soldier on with their chief executive, so there was no job for him there either. Theirs has not been an inspiring performance.
The big question is what Green will do now. Half of me wonders whether he ever had any intention of bidding and only stirred the pot to do his friend a favour and panic M&S into giving Rose the job. It would be a great plot for a TV play but the flaw is surely that Green has a passionate desire to get his hands on Britain's premier retailer and it would be stretching friendship too far to use his good offices to get the job for someone else.
So we have to assume Green was serious last week and continues to be serious this week. He might have had a hope before the palace revolution that the old board would talk to him. There seems little to no chance that this board will do other than observe the formal courtesies. Rose has done very well out of being on the losing side of bids at Argos and Arcadia but clearly he did not take this job and bring in a phalanx of his mates without intending to fight.
The key to Green's fortune has been buying cheap assets and the arrival of Rose, and a credible alternative management team means M&S will not be a steal. Investors now have a genuine alternative and the opportunity to tell Green that if he wants the chain he will have to pay dearly for it.
That is not his way. I suspect he would rather drop the whole idea than spend millions on advisers' fees launching a battle he has only a slim chance of winning.
Brighter for BAE
BAE SYSTEMS has had to endure a barrage of bad publicity for months now. Relations with its major customer, the Ministry of Defence, are at a low ebb, the board has been ruffled by criticism from respected non-executive director Paolo Scaroni for trying too hard to sell itself to the Americans and the aircraft carrier contract seems to be getting into ever-deeper trouble.
Equally troubling is that the chairmanship, though now filled, was vacant long enough to underline that this is a job no one wants. Go back a decade to the time of the late Professor Sir Roland Smith at the helm and see how many BAE chairmen before the current incumbent Sir Richard Evans spring to mind.
Senior industrialists who might well be qualified to do the job say it is simply too demanding. Having so few customers, all of them big, means the chairman is forever at their beck and call so his life is not his own. Evans' workload fills them with awe - but it is not something they want to emulate.
But investors have lost sight of two pieces of good news which suggest the company's prospects in the next couple of years are very much better than all the negativity suggests. First is the oil price. BAE is paid in oil under its biggest contract - the huge defence deal with Saudi Arabia - and the more the world price of oil goes up the more it makes.
The second boost for earnings comes as production of the Eurofighter clicks into gear. Longterm aircraft contracts always become much more cash-generative as they move from the development stage to production. Put that together with earnings from oil and the company could well be heading for a much more cheerful 12 months than its share price suggests.