£2bn break for M&S shareholders

STORES group Marks & Spencer has unveiled a complex £2bn share restructuring that returns 70p a share to its 365,000 investors large and small. Shareholders will not receive new money but the move gives them the chance to cash in part of their investment in M&S in a tax-efficient way.

For every 21 shares held, investors will receive 17 new ordinary shares and 21 B shares. Each B share can be redeemed for 70p in cash next month or at six-monthly intervals thereafter. M&S will pay a dividend of 2.1p on the shares and they will be tradeable. The company expects, however, that most investors will cash in their B shares immediately and the market for the stock will be very thin.

'The scheme means all our shareholders will be treated equally and they can sell or keep their shares to maximise any capital gains tax allowances,' said finance director Alison Reed. 'This is shareholders' money coming back to them. We do not want to mislead our shareholders into thinking this is new money.'

The number of M&S ordinary shares will be reduced by around 19% following the restructuring and the deal is conditional on shareholders' approval. 'We are looking for this to enhance the opportunities for earnings per share growth,' said Reed.

The scheme was first floated last March, as part of a comprehensive rearrangement of M&S' business. Since then, M&S has raised about £1bn from the disposal of Brooks Brothers in the US, the sale and leaseback of its stores and other small sales. The rest of the money to be distributed comes from the securitisation of certain properties and an increase in gearing from nought to just under 30%.

Chairman Luc Vandevelde said: 'This will enable us to improve the potential for a faster rate of earnings growth and create a more efficient balance sheet structure.'

Last week, M&S surprised the City with figures showing a rise in core clothing sales of almost 11% over the Christmas period. Group sales rose 7% excluding the impact of new space for the 15 weeks to 12 January.

Investors have been awaiting the final stage of the M&S disposal programme - the sale of Kings supermarkets in the US. The group said talks were ongoing and that an announcement would be made as soon as possible.