Marks & Spencer Shares Rise As Pension Deal Ignites Takeover Talk

Marks & Spencer Group has reached an agreement with the company's trustees that will fund its pension deficit over the next ten years in a deal that could mean the 130 year old retailer may be sold to private investors.

The funding plan, announced Wednesday, will see the company making annual contributions of around £28m over the next ten years in an effort to plug a £290m "black hole" at the high street retailer's defined benefit pension scheme - a huge decrease from the previous valuation of £1.3bn measured in March of 2009. A reduction on a previously agreed £60m contribution was also reached, the company said in a statement.

"It's a significant reduction, there's little doubt about that," said Richard Hunter, Head of Equities at Hargreaves Lansdown. "And it certainly could strengthen the case for the speculators, but I do consider this company to be a 'work-in-progress' and the share price performance seems much more closely linked to takeover specualtion than to the strenght of the underlying businesss."

Shares in the group jumped as much as 3.7 percent to 392 pence in London, the most in three months, following the announcement before retreating to 387.8 pence each. The shares have risen 22 percent since early July when reports of potential interest from private equity bidders began to surface.

The company also shuffled its management team after its biggest quarterly sales loss in at least three years - and following the wettest spring in British history. Kate Bostock, who ran the group's struggling clothing division, was replaced by M&S food veteran John Dixon and Belinda Earl, a former Jaeger & Aquascutum and Debenhams CEO, was brought in to lead its Style unit.

Bloomberg reported in August that US private equity group CVC Capital Partners had considered a bid for the group, citing people close to the situation. The report said the bid may have included keeping some of the company's current senior management and lifted M&S shares to the biggest single-day leap - 8.25 percent - in three years.

M&S is in the middle of a three year, £2.4bn restructuring under CEO Marc Bolland that aims to transition the group from a mainstay on Britain's High Street to a multi-chain, multi-channel international retailer. First half profits rose to just under £300m, the company said on 6 November, although sales growth continues to be an issue in a highly competitive UK market.