Marks & Spencer said today it would sell its financial services arm and return £2.3 billion sterling to shareholders as it tries to win their loyalty and fend off a £9.1 billion bid attempt.
Chief executive Mr Stuart Rose, parachuted in six weeks ago to see off Monaco-based tycoon Mr Philip Green, said the company will sell M&S Money to HSBC Holdings for £762 million. A tender offer for shares, to be priced at the end of next month, will pay stockholders the equivalent of 100p a share.
"The sum total of all this demonstrates that Philip Green's offer significantly undervalues the business," Mr Rose told reporters on a conference call.
M&S became vulnerable to Mr Green's second bid attempt in four years as it lost out in fashion to Next, in children's wear to Asda and in food to grocer Tesco.
A spokeswoman for Mr Green said he was waiting to see how the market reacted. Mr Green has said he will know within 48 hours whether M&S shareholders are backing the company or him.
Shares in the company were up 0.6 per cent at 370-1/4p by 11.15 a.m., valuing the 120-year old firm at £8.4 billion. The shares were trading at 290p before Mr Green revealed his interest on May 27th.
Hedge funds hoping for quick returns have been piling into M&S stock in recent days, and the company believes the funds now hold 15-20 per cent of the stock.
Mr Rose said M&S had been too focused on "process not product," as he rids the firm of distractions from the core clothing business by closing the expensive Lifestore furnishing chain and halting the roll-out of Simply Food.
He plans to spend £400 million a year from 2005/6 in modernising dowdy stores.
M&S also announced plans to buy the Per Una youth range for £125 million pounds from designer Mr George Davies, who will continue to run the brand for at least two years.