MARKS & SPENCER SUBJECT OF TAKEOVER RUMORS

JAMES FALLON

LONDON -- Marks & Spencer, owner of Kings Super Markets, West Caldwell, N.J., here is the subject of takeover rumors as at least one potential bidder admitted he was eyeing the struggling British retailer. But Tesco, the U.K.'s largest food retailer, downplayed reports it was planning to make an offer for the chain.

Philip Green, a British entrepreneur who has earned a fortune from buying and dismantling struggling U.K. retailers, confirmed to the U.K. Takeover Panel that he has appointed Donaldson Lufkin & Jenrette, a New York investment firm, to examine the possibility of a takeover of Marks & Spencer. However, Green stressed in a statement that it was too early to say whether the study would lead to any offer.

Tesco, Cheshunt, England, said it plans to stick to its stated strategy of overseas expansion of the chain. Analysts said Tesco might have looked at Marks & Spencer but it's likely that any offer it made for the chain would be referred to British antitrust authorities. Marks & Spencer has about 3% of the U.K. food retail market, while Tesco has about 17%.

The British government currently is studying whether Britain's leading food retailers -- including Tesco, J. Sainsbury plc, Safeway and Asda -- exercise monopoly power over the market. This would make it unlikely that the antitrust authorities would approve any Tesco bid for Marks & Spencer, analysts said.

The takeover rumors surrounding Marks & Spencer were stirred by a sharp rise in its share price. However, the price slipped back after the statements by Green and Tesco dampened takeover speculation.

Retailers including Hennes & Mauritz and Kingfisher, the investment group Knutsford and even French group Pinault-Printemps-Ridoute also have been mentioned as possible bidders for Marks & Spencer. However, several of these companies have said they have no interest in bidding for the company, while PPR and Kingfisher said they never comment on market rumors.

Knutsford is the investment vehicle formed by Archie Norman, former chairman of Asda, and three other partners. Asda was acquired by Wal-Mart earlier this year for $10.8 billion, a deal that has sent shock waves throughout European retailing.