Bidders given a Green light

THE battle over the next Marks & Spencer chairman is heating up. It is being portrayed as the choice between a City bigwig who would revitalise the board, against a retail expert who knows how to turn around the company. The latter must win out every time.

As we know from a long list of private-equity buyouts, the High Street has been generally underrated by the stock market - and given an intelligent injection of merchandising know-how, it is possible to turn a business around.

More important than laying wooden floors and swapping plastic carrier bags for the fashionable structured variety is making sure the right product is on the shop floor and is displayed in a manner that makes it attractive to its core audience of women customers.

Mostly, middle Britain wants an M&S that delivers good- quality products at the right price and is not scared of innovation.

The next chairman needs to be someone willing - as Marcus Sieff and Sir Richard Greenbury were - to patrol the floors of key stores, confer with managers and to talk to cashiers and shop staff and to understand the business from the bottom up.

Relying on computer read-outs or sales messages arriving on the handheld PC is not good enough. As Vittorio Radice observes, the next boss needs a splash of charisma.

But the new chairman also needs to be capable of taking key strategic decisions. Should a group of M&S's size and importance be sharing its margin with middlemen or going straight to source in Hong Kong?

Does it need to run its own financial services or should it do so with the expertise of Royal Bank of Scotland? Does a per una arrangement - which gives designer George Davies so much control over the brand (including the right to sell goods overseas) make any real sense?

I would venture to suggest that good chaps such as Paul Myners, Sir Derek Higgs and Sir Christopher Gent are, as Hollywood puts it, 'clueless' when it comes to the High Street. Their expertise is in the City, corporate finance and takeovers, not lingerie and men's knitwear.

Several companies have seen Stuart Rose as a potential chairman, including Debenhams (had the Permira bid been successful), New Look and possibly WH Smith. What he also possesses is 17 years' hard grind in the M&S culture, sadly missing from many in the current top tier.

Could Rose work with Roger Holmes? There is no reason why not. Their skills are almost certainly complementary - the management guru and someone who loves retail.

But, as was noted here yesterday, the board needs to shift itself. It cannot afford another bad Christmas. Despite the size of the task there is good reason to believe that M&S could be taken over. US investor Brandes has not built up a 12.5% stake for nothing. It obviously sees a buyout possibility as it does at J Sainsbury where it has 5%.

Four years ago Philip Green of Bhs and Arcadia had a tilt at M&S at above the present share price, only to be repelled after attacks on his spouse's share dealings. He is one of the few entrepreneurs who can put his hands on sufficient equity and loans - from a close circle of business associates and bankers - to pull it off. This time it may be harder for the advisers to circle the wagons.

After all Green has made himself one of Britain's richest fellows and the M&S share price has gone nowhere.

Industrial Gloom

ONE thing is absolutely certain. The next chairman of M&S will not face as buoyant a time on the High Street as has been the case over the last couple of years.

Interest rates are moving up, house prices are likely to moderate and the high levels of equity withdrawal - 8.3% of after-tax income according to the Organisation for Economic Co-operation and Development - are likely to trend down.

The only circumstances under which the Paris-based forecaster can see UK interest rates coming down is during a housing crash, which would endanger the stability of the economy.

The OECD concurs with the Bank of England's decision to raise interest rates three times since November, noting that inflation, although low, is heading towards the official target of 2%.

One source of disappointment for the OECD is the weak recovery in export volumes. The latest manufacturing figures offer little hope for the real economy of making goods and selling them overseas.

Output fell in March for the second month in a row with a decline in most sectors including hi-tech, now at its lowest point since 1997.

A well-balanced economy in which industry plays its full part still looks a long way off.