M&S would return £2.3bn to shareholders

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The Independent Online

Marks & Spencer today unveiled its strategy to win over shareholders as it battles to fend off a potential £9.1 billion offer from tycoon Philip Green.

Marks & Spencer unveiled a masterplan today for defeating a potential £9.1 billion offer from tycoon Philip Green - with a pledge to return to its retail roots.

M&S will sell its financial services division to help fund a £2.3 billion payout for shareholders, while generating annual savings of £320 million within three years.

Property has been revalued at £3.6 billion and the group will acquire the Per Una fashion brand as it seeks to revive like-for-like sales, which fell 2.8% in the 14 weeks to July 10.

The review by new chief executive Stuart Rose found the business had become too complicated, with stores cluttered with too many different lines.

Mr Rose, who took the helm in May in response to the emergence of bid interest from Mr Green, said the company had lost focus and allowed competitors to encroach on its heartland.

Analysts were divided on whether Mr Rose had done enough to fend off the overtures of Mr Green, who has offered 400p for each of the company's shares.

The proposed takeover was also dealt a blow by news that Mr Green may have to pay up to £785 million a year into the M&S pensions fund if his bid succeeds.

Shares improved by 1% ahead of a series of meetings between Mr Rose and investors that are likely to determine the outcome of the long-running takeover saga.

As part of his update today, the chief executive pledged to deliver value "significantly in excess" of 400p a share.

Mr Rose added: "Marks & Spencer is a great business with a strong brand.

"Today's announcement sees us refocusing on our core retail activities, with an emphasis on delivering great product for our 25 million customers.

"Our aim is to give Marks & Spencer back to our customers."

M&S has struck a deal with banking giant HSBC to sell its financial services operation for £762 million, but will remain a partner and take a 50% share of future profits.

Proceeds from the disposal of M&S Money, which has 2.7 million cardholders and total lending of £2.5 billion, will form part of the £2.3 billion returned to shareholders.

M&S announced that 650 staff would lose their jobs at its head office in Paddington, London, and deals with suppliers have been renegotiated to cut costs.

In the food halls, 500 product lines have been eliminated and Mr Rose pledged to lower the number of ranges being marked down for sale.

Homewares business Lifestore, in Gateshead, will shut by the end of January and the roll-out of Simply Food stores has also been stalled.

Retail analyst Nick Bubb, of Evolution Beeson Gregory, said the review was punchy enough to prove "a killer blow" to Mr Green's chances of landing the retailer.

"On the face of it, M&S is steering people to profits of £1.1 billion next year which is a useful uplift and would justify a share price of 400p today," he said.

"Achieving that through the sale of financial services rather than a sale of property is a brilliant piece of engineering."

But a more cautious stance was taken by Seymour Pierce analyst Richard Ratner, who said the outcome of the battle for control of M&S remained "too close to call".

Investors face a difficult choice between backing Mr Rose to deliver the savings outlined today or taking the cash that Mr Green is willing to pay, he said.

"Philip Green has 400p on the table and people will want to see how Mr Rose will get to that price in pretty quick time," Mr Ratner said.

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