M&S sets share buyback price

SHARES in Marks & Spencer held their nerve today after the ailing High Street giant said the strike price for its controversial £2.3bn tender offer for stock would be 362p.

Although that figure is way off the 400p that rival Bhs and Top Shop retailer Philip Green appeared to be offering during his shadow takeover bid in the summer, it is above the amount commentators had been predicting and, as important, is at a premium to Friday's closing price of 357p.

The tender offer - controversial because the indicative pricing showed that it was likely to be at a substantial discount to Green's potential bid - was reckoned by many share dealers to herald a significant slide in the M&S price.

The offer was thought to have been artificially inflating M&S shares. The stores chain recently revealed further declines in its performance with clothing and homeware sales down 7.7% and food sales off 2.6% from a year ago.

However, the shares were holding their own today, rising 1p to 358p.

The tender offer cancels about 27.9% of M&S's share capital, equating to 635m shares, as M&S returns a total of £2.3bn to shareholders.

The move was a central plank of chief executive Stuart Rose's plans to revitalise the ailing High Street giant. By cancelling so many shares, it will enable M&S to improve, if not its profits, its earnings per share figures, a key ratio looked for by analysts in rating company's shares. It will also mean the group will be able to underpin future dividend payments as shareholders' payouts will not have to be distributed across so many shares to so many shareholders.

According to the terms of the offer, all valid tenders submitted at below 362p will be accepted in full.

All tenders at 362p will be scaled back pro rata so that just under 43.5% of shares tendered at that price will be repurchased.

Tender offers priced at above 362p will be rejected.

The strike price is slightly above the middle of the 332p-380p indicative spread, about 5% lower than the top but 9% above the floor.

Cheques for the repurchase of shares are being dispatched on Thursday, the day on which investors' shareholdings will be officially revised.

M&S advisers declared the process a success, with the numbers suggesting that the tender offer had been oversubscribed.

The advisers also defended the tender offer process. They argued that, had the repurchase of shares been through a traditional share buyback programme - which several other FTSE 100 companies are doing at present - the ability to cancel shares accounting for nearly a third of the company would have meant a slow process taking up to a year to complete.

About a fifth of M&S shares are held by private investors with Brandes, the activist US investor that played a role in activating Green's £9bn shadow bid for the company, still holding almost 7%.