M&S attempts to woo shareholders with #2.3bn payout

Mr Stuart Rose, chief executive of Marks & Spencer, yesterday launched his long-anticipated counter-attack to Mr Philip Green's £9.1 billion (€13.67 billion) hostile takeover bid, promising changes including a renewed focus on core business and a big payout to shareholders.

Mr Rose, who took over as chief executive after a management shake-up in May, said the UK retailer would return £2.3 billion - about £1 a share - to shareholders in the form of a tender offer.

He also announced the sale of M&S Money and the closure of its Lifestore in Gateshead in the north of England.

Mr Rose pledged a "return to core values" for M&S, which saw like-for-like sales slip 2.8 per cent in the first quarter year-on-year.

He said the retailer would review its brand portfolio and launch a campaign to revamp its brand image and modernise its existing stores. "Our aim is to give Marks & Spencer back to our customers," Mr Rose said.

M&S also revealed that its property portfolio, which includes 375 stores, is valued at £3.6 billion - £1.4 billion above current book value.

Investors responded cautiously to Mr Rose's plan. Some pledged to decide within 48 hours, while others planned to study the M&S announcement and make a decision next week.

Mr Robert Talbut, chief investment officer of Isis Asset Management, said: "This is a big call and we will not be rushed. But my early sense is that Stuart Rose could have done just enough to win the battle."

Another large UK shareholder, which declined to be named, said: "There is nothing revolutionary in this morning's announcement. We will not decide until next week, but I believe M&S probably needed something more exciting to win over sceptics."

M&S shares, which slipped after a brief early-morning rally, closed 4p lower at 364p.

Pressure to deliver value for shareholders has been mounting on Mr Rose since he rejected as inadequate last week's third offer proposal from Mr Green.

M&S said that although it remained one of the UK's top brands, its business had become too complicated, with too many brands, cluttered stores, and an inefficient supply chain. As part of its effort to re-focus on its core business, Mr Rose said M&S would sell its financial services arm to HSBC for £762 million. M&S Money will continue to operate under the M&S brand name, and M&S will pocket 50 per cent of after-tax profits under the terms of the deal. Mr Rose also announced the end of the Lifestore experiment - the furniture stand-alone project launched this spring.

On the operational side, Mr Rose said M&S would embark on a cost-cutting programme expected to make savings of £250 million for 2005-06. He said about 650 jobs would be lost as part of the plan.