Marks & Spencer gains on report of Apollo's interest in grocer

[GENEVA] Marks & Spencer Group rose after a report that Apollo Global Management Inc has been considering a bid for the UK retailer.

The private equity firm began assessing the retailer after concluding it was undervalued due to the coronavirus pandemic, The Sunday Times reported, citing unidentified sources. It is unclear whether a recent rally in M&S shares has damped Apollo's interest, the newspaper added.

The stock gained as much as 3.5 per cent in early London trading, after climbing 31 per cent in the month through Friday. The company raised its profit forecast for a second time on Nov 10, raising hopes that a long-awaited recovery might be at hand.

The interest would be the latest sign that UK retailers remain in the cross-hairs of buyout funds after deals for Asda and Wm Morrison Supermarkets. Apollo, which has more than US$80 billion in equity assets under management, had shown interest in both those deals, only to lose out to other bidders.

Apollo and M&S declined to comment.

The Sunday Times said in August that Apollo was said to be "running the rule" over J Sainsbury, Britain's second-largest grocer. Britain's supermarkets have attracted buyout interest as the economics of the industry have dramatically improved since the onset of the pandemic, which elevated sales and accelerated changes in shopping habits.

Supermarkets generate substantial cash and have large property portfolios. The rise in online shopping has made e-commerce more profitable. Clayton Dubilier & Rice bought Wm Morrison for £7 billion (S$12.8 billion) in October, beating out Fortress Investment Group. In 2020, TDR Capital and the Issa brothers agreed to buy the country's third-largest grocer, Asda Group Ltd, in a £6.8 billion-pound deal.

M&S's 50 per cent stake in the retail business of Ocado Group increases its appeal to Apollo, the Sunday Times reported.

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