Share Consolidation and B Shares (Return of £2bn in 2002)
In 2002 Marks & Spencer underwent a capital re-organisation. This was part of a project to return £2bn to shareholders. Shareholders were given a new “B share”, valued at 70p, for every ordinary share they owned at the time of the re-organisation. To make this possible the ordinary shares were consolidated at a ratio of 17 for 21, meaning that for every 21 ordinary shares held you received 17 new ordinary shares in Marks and Spencer Group plc.
The creation of B shares gave shareholders the opportunity to either redeem their entire holding of B shares at the time of creation and take the money, or to hold their B share allocation and receive dividends semi annually. If we had simply paid an increased dividend or made a one off capital payment we may have put many of our shareholders in a position where they had been liable to pay capital gains tax. This could have reduced the amount of money they were able to receive.
The B shares gave the flexibility to redeem the shares twice a year, for 70p per share, allowing shareholders to manage their tax liabilities in accordance with their situation. The value of the B shares would not have changed over the period that they were held. At the first redemption date more than 80% of the B shares were redeemed by shareholders who chose to take the cash.
Example of how it worked
Number of shares used for example
|210 ordinary shares |
Closing Price of shares in Marks and Spencer plc as at 18 March 2002
Value of shares in Marks and Spencer plc prior to the reorganisation
|£786.46 (210 x £3.745)|
Shares split at a ratio of 17 new shares in Marks and Spencer Group plc for every 21 shares held in Marks and Spencer plc. B shares created and allocated on a basis of 1 new B share for every 1 share held in Marks and Spencer plc (pre reorganisation)
After the reorganisation
Number of new ordinary shares held following the reorganisation
|170 ordinary shares (210 / 21 x 17) |
Theoretical opening price on the first day of trading (19 March 2002) of the new Marks and Spencer Group plc
|£3.7615 (increase of 1.65p)|
Value of shares in Marks and Spencer Group plc following the reorganisation
|£639.45 (170 x £3.7615)|
Number of B shares held following the reorganisation
| 210 B Shares|
Value of B shares in Marks and Spencer Group plc following the reorganisation
|£147 (210 x 70p)|
Value of new ordinary shares and new B shares combined
|£786.46 (£639.45 + £147)|
Not all calculations would have been as simple as that shown above and fractional amounts would have been created. Shareholders were sent a cheque representing the value of this fractional entitlement.
Following the capital re-organisation, all old share certificates (dated pre March 2002) became invalid and new certificates were sent to all shareholders.
All outstanding B shares (74,184,314) were redeemed at par value (70 pence per share) on 5 May 2006. On Redemption the B shares were cancelled and the Company requested that the Financial Services Authority removes the B Share listing from the Stock Exchange.
The decision by the Company to redeem all outstanding B shares was consistent with the rights and restrictions attaching to the B shares contained in the circular sent to shareholders in February 2002 prior to approval at the Extraordinary General Meeting of the Company on 28 February 2002.
Read a copy of the circular (30kb PDF)
The proceeds of the redemption
This would generally be treated in the hands of a shareholder as the proceeds of a disposal for the purposes of the UK taxation of chargeable gains. This applies even if you elected to invest the proceeds in Marks & Spencer shares or donate it to ShareGift.
Following the Marks & Spencer capital reorganisation in March 2002, the base cost for CGT purposes was 372.35p (81.43%) for each ordinary share and 68.75p (18.57%) for each B share.