WOMEN wear 18 times as much underwear as men. This was the staggering statistic for UK manufacturing sales of underpants, briefs and boxer shorts last year.

Assuming that women do not wear 18 items a day, the figures point towards a particularly disgusting attribute of the UK male.

Why am I talking pants? People often ask me this. The focus of the past fortnight has been Marks & Spencer, which has historically claimed to clad the nether regions of a third of the UK population, at least in terms of sales anyway. Among womenswear, the UK lingerie market has been valued at £1.5bn a year. This translates to £500m in sales by Marks & Spencer.

While M&S has much more to it than underwear and lingerie sales, it has been clear over the past two weeks that Philip Green, the retail entrepreneur, is keen to be the supplier of choice. The initial proposals submitted last week, valuing the company at close to £9bn, was rebuffed by the M&S board of directors as significantly undervaluing the group and its prospects. The board has a duty to act in the best interests of shareholders and clearly believes there is room for improvement. The proverbial ball was placed firmly back in the court of keen tennis player Philip Green.

The owner of other high street names, such as Bhs, Dorothy Perkins and TopShop, has now had the weekend to think about his next move. With his opening gambit of proposing a partial cash and shares offer countered by the Sicilian defence put up by Marks & Spencer with the exchange of personnel, Green has to go for the kill or bow out gracefully. His advisors will be taking soundings before any talk of a hostile bid raises its head.

So what does all this mean for Marks & Spencer shareholders in the meantime? Firstly, since the start of the year, the shares have traded in a range between 264p and 302p. The potential bid has since pushed the share price 27 per cent higher. Obviously, the value of each Marks & Spencer shareholding has increased accordingly.

Secondly, in response to a bid being prepared, there have been sweeping changes to the board of directors. Stuart Rose took up the role of chief executive over the bank holiday weekend and had his feet under the desk by last Tuesday morning. Rose is highly regarded by the City and there is a groundswell of opinion that the company may now be in the best pair of hands anyway. It is difficult to see how Philip Green could improve trading over and above what Stuart Rose intends to do.

The only benefit to existing shareholders with regards to Philip Green's interest would be if Green came up with a fresh proposal that could not be turned down.

This would be known as the knock-out bid - a value deemed higher than the uncertain future value of a revitalised Marks & Spencer under its current new management.

What if Green walks away? There is still the implication that the Marks & Spencer share price undervalues the company. There is, therefore, a limited downside if a renewed bid is not forthcoming.

There may, though, be better prospects in the retail arena elsewhere.

For investment advice contact Anthony Platts on 01642 608855.

Published: 08/06/2004