Green hits back at Rose in row over pension fund payment

Philip Green, the billionaire entrepreneur bidding to take over Marks & Spencer, yesterday dismissed as irrelevant suggestions that he might have to pay £785m a year for three years into the company's pension fund if he succeeds.

Philip Green, the billionaire entrepreneur bidding to take over Marks & Spencer, yesterday dismissed as irrelevant suggestions that he might have to pay £785m a year for three years into the company's pension fund if he succeeds.

He said: "Pension contributions have to be agreed with the board, and if I win the board will be different from what it is today. Pension trustees have got no divine right. It's got to be negotiated, and I find if I am negotiating with myself I generally come out all right."

On Saturday, the M&S board, led by Stuart Rose, said it had asked the trustees of its pension scheme about "the possible impact on the pension fund of a deterioration in the creditworthiness of the employer group."

In a statement, the Trustees said they would be concerned "as to any material weakening of the company's covenant and have said that, in such circumstances, they would be bound to consider the adoption of a more conservative investment strategy, involving a significant shift into bonds. The Trustees have stated that if they were to decide to change the investment strategy, they would seek to agree with the Company any consequent change in funding arrangements".

The £785m figure was arrived at on the assumption of moving the fund 100 per cent into gilts, compared with the present split of 40 per cent in bonds of different grades and 60 per cent in equities. An M&S source conceded that £785m was "an extreme scenario", and part of a spectrum of possibilities that could be hypothetically considered.

This is the latest round in the contest between Mr Green and Mr Rose, who were until recently working colleagues and personal friends.

But Mr Green refused to align himself with reports that he had the support of shareholders owning nearly a third of M&S shares after his proposal last week to make an offer worth 400p a share, or £9.1bn. This is described as "final", which under the City Takeover Code means Mr Green cannot increase it for a year unless a rival bidder emerges. The Takeover Panel has given Mr Green until 6 August to issue a formal offer, as opposed to the informal indications to which he has confined himself up to now.

Everyone is awaiting a strategy review, expected from Mr Rose today, in which he will put forward plans for reviving the group and returning money to shareholders. Sources close to the company said the amount to be returned would be between 75p and 100p a share, suggesting that 100p or £2.27bn would be the very most which Mr Rose would come up with. A round £2bn, equal to just under 90p a share, seems more likely, which should have the effect of increasing earnings per share.

Mr Green said yesterday: "Luc Vandevelde [the chairman until May] tried that, and where did that get him?"

M&S made no comment yesterday on the shape of Mr Rose's review, but stock market analysts believe he will provide more stylish fashions aimed at the core audience of over 35-year-old customers and scrap the Per Una Due clothing range aimed at teenagers. Food will be simplified and the Simply Food chain of standalone grocery stores is expected to be trimmed back. The group's latest flirtation with furnishings will be scrapped.

Observers also predict that Mr Rose will hammer out tougher deals with suppliers. He has already squeezed an extra £100m in discounts, but analysts believe that up to another £300m could be sliced off costs.

The company's property portfolio, which includes freeholds and long leaseholds on the bulk of its 300 UK stores, could rate a value of £3.5bn compared with the current balance sheet's £2.2bn, a figure dating back to 1988.

M&S shares closed on Friday at 368p. The company's 350,000 individual shareholders will have a chance to question Mr Rose about his strategy at their annual meeting on Wednesday.