Big banks target M&S Money

HIGH Street banks are believed to be circling Marks & Spencer - and not just because sacked directors keep leaving its Baker Street HQ with pockets stuffed full of cash.

Stuart Rose's wholesale review of the business has flushed out some early interest in its financial services arm, according to City sources.

Analysts say interest could have come from the acquisitive Royal Bank of Scotland, GE Capital, HSBC or MBNA, which bought Alliance & Leicester's credit card operation two years ago. Sources close to M&S insisted there had been 'no outgoing calls'.

A sale could eclipse the protracted sell-off of online bank Egg by insurer Prudential. Five months after it disclosed it was in talks to sell off its 79% controlling stake, the insurer appears no closer to finding a buyer. RBS is said to have walked away.

M&S has 2.1m high-value '&more' credit card customers after switching nearly half of its 5m store card holders to new accounts last year. Egg has 3m customers, but a struggling French credit card venture. A sale of M&S Money would raise £900m for the group to plough back into its stores.

'It is not something we would discuss at this point,' M&S said. 'Stuart is looking at everything and at the moment that means going around to see some of the stores.'

Rose has gone on a whistle-stop tour around the UK. Starting in Liverpool, he will visit stores in Scotland and Wales unannounced over the next two days to check out what is going wrong at a grassroots level.

Just 24 hours after M&S announced that stores chief Vittorio Radice was on the way out with a cash and shares pay-off worth £1.2m, its annual report confirmed that clothing director David Norgrove left the company with £754,000 to compensate him for loss of office.

His underwhelming ranges contributed to a disastrous Christmas trading period. But Norgrove's total pay was £1.1m last year, making him the highest paid director in the annual report.

The boardroom clearout instigated by axe-wielding interim chairman Paul Myners and new boss Rose is not coming cheap.

M&S has paid out £3.6m in the last month as it bade farewell to five directors. That may not be the end of it. Finance director Alison Reed and international boss Mark McKeon still look vulnerable.

Directors don sackcloth and ashes in the company's annual report. Only Laurel Powers-Freeling, head of M&S Money, was awarded a bonus for overseeing the launch of the '&more' card. She took home an extra £35,000 last year.

The pay of fired chief executive Roger Holmes shrank 39% to £693,000, but that will be plumped up by an £820,000 pay-off. Luc Vandevelde was paid £547,000 in shares, much less than his £1.73m in 2003. Radice, who masterminded the for-the-chop Lifestore interiors operation, took home £556,000, compared to £1.2m.

Fund manager Isis will be questioning the company about the pay-offs. 'We will be seeking reassurance that this is the legal minimum,' said Richard Singleton, director of corporate governance at Isis.

'This is one of the problems when companies recruit what they hope will be high achievers. They have to be mindful of what it will cost if it all goes wrong.'

Small shareholders, of which the group has 350,000 holding about 20% of the shares, are expected to vent their anger over the 'rewards for failure' at the annual meeting next month.

Meanwhile, bidder Philip Green's camp is sounding out shareholders about a new offer, although it is not known whether it has had talks with Brandes, the US company that holds a crucial

12.41% stake.

Brandes has sold several parcels of M&S shares in recent days, including a block of three million last week. It offloaded more than 23,000 on Wednesday at around 360p each.

Terms of Green's indicative offer last week were cash of between 290p and 310p a share plus 25% of the equity in his bid vehicle Revival Acquisitions, but the institutions say they want more than 400p.

The annual report was already in production before Myners ousted Vandevelde and Holmes in order to defend M&S from Philip Green's predatory approach.

M&S says it did not stop the print run - to save money for shareholders - but instead it inserted a covering note from Myners. That means the message from departed chairman Vandevelde is hopelessly out of date.

'It would be easy to lose sight of the fact that we are building this next stage [of the company's development] on secure foundations, which we have put in place over the last three years,' he writes.

M&S insists that no decision has been taken on whether it will sell and leaseback another chunk of its property portfolio.

Veteran property magnate Gerald Ronson is said to be raising funds to buy store freeholds, but his company Heron International would not comment. M&S sold off a portfolio of property to Topland three years ago to raise £348m.