MSLH Marshalls Plc

RNS Number:4014Y
Marshalls PLC
07 May 2004

NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE UNITED STATES,
CANADA, AUSTRALIA OR JAPAN

MARSHALLS PLC

Part I

PROPOSED RETURN OF #75 MILLION TO SHAREHOLDERS BY WAY OF A CAPITAL
REORGANISATION

Highlights

- Return of #75 million (equivalent to 45 pence per Existing Ordinary Share)

- Return to be effected by way of a Scheme of Arrangement, involving the
  introduction of a new listed holding company, Marshalls Group

- For every 13 Existing Ordinary Shares held at 5.00 p.m. on 7 July 2004,
  Shareholders will receive 11 New Ordinary Shares and 13 B Shares

- Shareholders can have their B Shares redeemed for 45 pence each in cash
  on 16 July 2004 (in which case monies due will be sent to Shareholders by
  21 July 2004). Alternatively they can retain all or some of their B Shares
  and receive a continuing dividend equal to 75 per cent of 6 months' LIBOR,
  payable semi-annually in arrears, until such shares are redeemed

- Return is conditional upon the approval of Shareholders at the Court Meeting
  and EGM, to be convened for 10 June 2004, and the subsequent approval of the
  High Court

- Return will create a more efficient capital structure (Marshalls' gearing
  ratio at 31 December 2003 was 6%) and the Company will still retain sufficient
  financial flexibility to take advantage of future investment opportunities.
  Marshalls' cash flow generation continues to be strong

- Marshalls' sales for the first four months of this year are slightly ahead
  of the prior year which was a strong comparable period

Commenting on the announcement, Christopher Burnett, Chairman, said:

"This return of capital to Shareholders reflects Marshalls' considerable
success in growing shareholder value and generating cash, whilst maintaining
financial flexibility for the future development of the Group."

Part II

PROPOSED RETURN OF #75 MILLION TO SHAREHOLDERS BY WAY OF A CAPITAL
REORGANISATION

Background to the Proposals

Following a detailed review of the Company's strategic options during the period
since July 2003, the Board of Marshalls announced, on 5 March 2004, its
intention to create a more efficient balance sheet structure through the return
of approximately #75 million to Shareholders during the course of this summer.

Since then, the Board of Marshalls has agreed new banking facilities in relation
to the Return of #75 million (equivalent to 45 pence per Existing Ordinary
Share)and has developed the procedure to effect the Return.  This is in addition
to the final dividend of 7.35 pence per Existing Ordinary Share payable on
7 July 2004, to Shareholders on the register on 4 June 2004.

The Return of #75 million will be achieved through the introduction of a new
listed holding company, Marshalls Group plc (to be re-named "Marshalls plc" upon
the Scheme becoming effective), via a Court approved Scheme of Arrangement and a
subsequent Reduction of Capital.

The Return of #75 million is conditional, inter alia, on obtaining Shareholder
approval at the Court Meeting and Extraordinary General Meeting (to be
convened on 10 June 2004) and the subsequent approval of the High Court. A
circular setting out details of the Proposals, together with notices for the
Court Meeting and Extraordinary General Meeting, will be posted to Shareholders
by 18 May 2004.

Choice of mechanism

The Board of Marshalls has considered various mechanisms for returning value to
its Shareholders and has concluded that the issue to Shareholders of redeemable
B Shares, and the subsequent redemption for cash thereof represents the most
appropriate method of achieving such a return for the following reasons:

- certainty of completion (subject to the Proposals being approved by
  Shareholders and the High Court);
- equality of treatment for all Shareholders; and
- maximum flexibility for Shareholders in terms of the timing of the
  receipt of the Return.

Summary of the Proposals

Under the terms of the Scheme, Shareholders will receive, in exchange for their
Existing Ordinary Shares held at 5.00 p.m. on 7 July 2004, New Ordinary Shares
and B Shares on the following basis:

   for every 13 Existing Ordinary Shares 11 New Ordinary Shares and 13 B Shares

Fractional entitlements to New Ordinary Shares will be rounded down to the
nearest whole New Ordinary Share. Any fractional entitlements so arising will be
aggregated and sold in the market for the benefit of Marshalls Group.

Application will be made for the New Ordinary Shares to be admitted to the
Official List and to trading on the London Stock Exchange. It is expected that
the Existing Ordinary Shares will cease to be traded on the London Stock
Exchange at the close of business on 7 July 2004. It is anticipated that the New
Ordinary Shares will be admitted to the Official List and commence trading on
the London Stock Exchange at 8.00 a.m. on 8 July 2004.

The B Shares will not be admitted to the Official List and nor will they be
traded on the London Stock Exchange or any other exchange.

Share consolidation

The Return of #75 million, which will be achieved through the issue and
subsequent redemption of the B Shares, represents approximately 15 per cent of
the Company's market capitalisation at the close of business on 6 May 2004.

Accordingly, the number of New Ordinary Shares to be so issued pursuant to the
Scheme will be approximately 15 per cent lower than the number of Existing
Ordinary Shares in issue, reflecting the fact that this proportion of the
Company's market capitalisation is being returned to Shareholders. The reason
for so doing is to allow broad comparability (subject to normal market
movements) of Marshalls and Marshalls Group's share prices, earnings per share
and dividends per share before and after the Return of #75 million. On the basis
of the 167.4 million Existing Ordinary Shares currently in issue, the number of
New Ordinary Shares to be issued pursuant to the Scheme will be approximately
141.6 million.

Redemption of B Shares

Shareholders will have two choices in respect of their B Shares:

Choice 1: Immediate Redemption

Shareholders may choose to have their B Shares redeemed for 45 pence per B Share
on 16 July 2004; or

Choice 2: Deferred Redemption

Shareholders may choose to keep all or some of their B Shares and receive a
continuing non-cumulative dividend equivalent to 75 per cent of 6 months'
LIBOR, payable on the nominal amount of 45 pence per B Share, semi-annually in
arrears.  Thereafter, such Shareholders will have the opportunity to have
their B Shares redeemed by Marshalls Group on a semi-annual basis on 30 June
and 31 December, although Shareholders should note that Marshalls Group will
retain the right to redeem compulsorily all of the outstanding B Shares after
three years or earlier if the number of B Shares remaining in issue
falls below 25 per cent of the number of B Shares originally issued.

US Shareholders should note that they will be deemed to have opted for the
Immediate Redemption in respect of their B Shares. Overseas Shareholders
(other than US Shareholders) should note that they may not, if the
Company so determines for regulatory reasons, be offered the option to elect for
the Deferred Redemption and will in that event receive cash pursuant to
the Immediate Redemption in respect of their B Shares after the
Reduction of Capital becomes effective.

Reduction of Capital

As part of the Proposals, Marshalls Group is undertaking a Reduction of Capital
to create additional distributable reserves. This will allow the Return of #75
million to be effected without impacting on the availability of Marshalls'
existing distributable reserves and will create additional distributable
reserves which will be available for potential future distribution to
Shareholders at the discretion of the directors of Marshalls Group.

Dividend policy

The directors of Marshalls Group intend to follow a dividend policy that takes
into account the long term development of the New Group. The Scheme and the
subsequent Reduction of Capital themselves will not change Marshalls' current
dividend policy.

Current trading and prospects

Marshalls' sales for the first four months of this year are slightly ahead of
the prior year which was a strong comparable period.  The Board looks forward
to the New Group's prospects for the current financial year with confidence.

Enquiries:

Marshalls plc:
Christopher Burnett, Chairman    )
Graham Holden, Chief Executive   ) Tel: 01484 438 900
Ian Burrell, Finance Director    )

Brunswick:
Jon Coles Tel: 020 7404 5959

Rothschild:
James Fenwick Tel: 0113 200 1900

HSBC:
Nick Donald Tel: 020 7992 2151

N M Rothschild & Sons Limited, which is authorised and regulated by the
Financial Services Authority, is acting exclusively for Marshalls plc and
Marshalls Group plc and no-one else in connection with the Proposals and will
not be responsible to anyone other than Marshalls plc or Marshalls Group plc for
providing the protections afforded to its customers or for providing advice in
relation to the Proposals or the contents of this announcement.

APPENDIX 1

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

                                                                      2004
Circular sent to Shareholders                                    by 18 May

Latest date for receipt of forms of proxy                           8 June

AGM, Court Meeting and Extraordinary General Meeting               10 June

Court hearing of the petition to sanction the Scheme                5 July

Last day of dealings in Existing Ordinary Shares                    7 July

Final dividend of 7.35 pence per Existing Ordinary Share            7 July
payable to Shareholders on the register on 4 June 2004

Scheme Record Time                                     5.00 p.m. on 7 July

Effective Date of the Scheme                                        8 July

Crediting of New Ordinary Shares to CREST accounts                  8 July

Dealings in New Ordinary Shares commence
on the London Stock Exchange                           8.00 a.m. on 8 July

Court hearing of the petition to confirm the                       13 July
Marshalls Group Reduction of Capital

Marshalls Group Reduction of Capital becomes effective             15 July

Last time for receipt of Forms of Election            3.00 p.m. on 15 July

Despatch of share certificates in respect of New Ordinary       by 15 July
Shares

B Shares redeemed by Marshalls Group                               16 July

Despatch of cheques and proceeds credited to CREST              by 21 July
accounts in respect of the Immediate Redemption

Despatch of share certificates in respect of B Shares           by 21 July
for those electing for the Deferred Redemption

Crediting of B Shares to CREST accounts for those               by 21 July
electing for the Deferred Redemption

The dates above are based on Marshalls' current expectations and may be subject
to change. Any changes to this timetable will be the subject of a further
announcement.

APPENDIX 2

DEFINITIONS

The following definitions apply throughout this announcement unless the context
requires otherwise:

"Annual General        the annual general meeting of Marshalls convened for 10
Meeting" or "AGM"      June 2004, and any adjournment of that meeting

"B Shares"             the B Shares of 45 pence each to be created in the share
                       capital of Marshalls Group

"Board" or             the directors of Marshalls
"Directors"

"Court Meeting"        the meeting of Marshalls Shareholders to be convened by
                       order of the High Court

"CREST"                the system for the paperless settlement of trades in
                       securities and the holding of uncertificated securities
                       operated by CRESTCo Limited, the operator of CREST, in
                       accordance with the uncertificated Securities Regulations
                       1995 (SI 1995 No. 95/3272)

"Deferred Redemption"  the option available to Shareholders to keep all or some
                       of their B Shares subject to the right to have their B
                       Shares redeemed at a future date by Marshalls Group at
                       45 pence per B Share

"Extraordinary General the Extraordinary General Meeting of Marshalls to be
Meeting" or "EGM"      convened for 10 June 2004

"Existing Ordinary     ordinary shares with a nominal value of 25 pence each in
Shares"                the share capital of Marshalls which, if held at the
                       Scheme Record Time, will entitle the holder to
                       participate in the Scheme

"Form of Election"     the form which will enable Shareholders to choose between
                       the Immediate Redemption and the Deferred Redemption

"Immediate Redemption" The option available to Shareholders to have their B
                       Shares redeemed immediately by Marshalls Group at 45
                       pence per B Share

"LIBOR"                the London inter-bank offered rate, being the rate at
                       which leading banks in the London market offer to take
                       sterling deposits from one another

"London Stock          the London Stock Exchange plc
Exchange"

"Marshalls" or the     Marshalls plc which, upon the Scheme becoming effective
"Company"              will change its name to Marshalls Group plc

"Marshalls Group"      Marshalls Group plc, the parent company of the New Group
                       which, conditional upon the Scheme becoming effective,
                       will immediately change its name to Marshalls plc

"Marshalls Group       the proposed reduction of capital of Marshalls Group
Reduction of Capital"  under section 135 of the Companies Act
or "Reduction of
Capital"

"New Group"            Marshalls Group and its subsidiary undertakings on and
                       after the Scheme Effective Date

"New Ordinary          means:
Shares"
                       (i) prior to the Reduction of Capital, the ordinary
                       shares in Marshalls Group of 150 pence each
                       (ii) following the Reduction of Capital, the ordinary
                       shares in Marshalls Group of 25 pence each

"Official List"        the Official List of the UK Listing Authority

"Overseas              shareholders resident in, or citizens of, jurisdictions
Shareholders"          outside of the United Kingdom

"Proposals"            the Proposed Return of #75 million to be achieved via the
                       Scheme, the Marshalls Group Reduction of Capital and the
                       adoption of the new articles of Marshalls Group

"Return of #75         the proposed return of approximately #75.3 million to
million" or the        Shareholders, subject to the approval of Shareholders and
"Return"               the High Court

"Scheme" or "Scheme of the scheme of arrangement under section 425 of the
Arrangement"           Companies Act 1985 between Marshalls and holders of
                       Existing Ordinary Shares, including any modification,
                       addition or condition approved or imposed by the High
                       Court

"Scheme Effective      the date of which the Scheme becomes effective in
Date"                  accordance with its terms

"Scheme Record Time"   5.00 p.m. on the business day immediately preceding the
                       Scheme Effective Date

"Shareholders"         holders of Existing Ordinary Shares and/or New Ordinary
                       Shares and/or B Shares as the context may require

"US Shareholders"      Shareholders resident in the United States of America

7 May 2004








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