Nice money, if you can get it

Philip Green’s 408p a share bid looks hard to resist provided Green's pre-conditions can be satisfied. Comment from Breakingviews.com.

Arcadia: Those who doubted Philip Green's resolve must have been surprised by his unsolicited £772m bid for British retailing group Arcadia. At 408p a share, the self-made retailing mogul and Bhs proprietor leaves Arcadia management with little choice but to accept his cash – should it actually arrive. For despite the surprise of Green's tabling of an offer, questions surround one of its pre-conditions – reaching an agreement to sell parts of Arcadia to Iceland's Baugur.

On its own, Green's offer values Arcadia at about 12 times earnings per share this year, on a par with the UK clothing sector and the stock's all-time high. Compared to the Arcadia price before Green lodged a preliminary 365p, the latest bid represents a 53% premium. It's also in the ballpark where Arcadia management said it would consider selling out.

Considering the flagging appetite – and buying power – of UK consumers and wary of a possible war in Iraq, most institutions are unlikely to support a go-it-alone strategy should Arcadia chief Stuart Rose suggest one. Just the same, conditions attached to the bid leave some discomfort.

Indeed, one such proviso – that Green reaches an agreement with Baugur – is already making arbitrageurs jittery. Police raided Baugur's Reykjavik headquarters Wednesday in a fraud probe of its chairman and chief executive. Baugur's board said the accusations, brought by US clothier Nordica, were `wrong.'

Assuming they are right, and barring the arrival of a white knight, Arcadia looks set to lose its independence. But do not shed a tear for Rose, who arrived when the stock languished at 51p. At the offer price, his 6.47m options are £23m in the money. Sure, he may be out of a job, but as Green says, `he doesn't need one and we probably couldn't afford him.'