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M&S shares rise amid bid speculation

Shares in Marks and Spencer have risen and could see further rises, amid press speculation that the retailer could become the target of a takeover bid.

Speculation around a potential bid has already pushed shares up 2.5% to 334p.

Broker Shore Capital said speculation surrounding M&S was unlikely to be “total flights of fancy or fiction”, although acknowledged the retailer had not commented on the rumours.

And despite concerns around the UK’s wider economy, and the underperformance of womenswear in particular, the analyst said it recommended the share as a buying opportunity because of M&S’ “potential medium-term cash generation once the investment phase is complete and the benefits are harvested”.

Those benefits include internationalisation and online as additional channels of distribution, Shore Capital said.

“We deem it to be a business the shares of which are not overrated,” said the broker. “The stock also has very good income credentials.

However, in an opposing view, broker JP Morgan has said it believes a takeover of M&S would be “unlikely” for a number of reasons including an increased pension liability and property lease liability.

“Given the headline valuation, we understand why the shares have become a subject of a bid speculation once again, but given the liabilities and the pension in particular, we think it unlikely,” it said.

The bid speculation comes off the back of M&S reporting its worst trading since 2008, with like-for-like general merchandising down 6.8% over the three months to end-June 2012.

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