Why Shares Of IMI plc Jumped

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares in IMI (LSE: IMI), the global engineering group headquartered in Birmingham, jumped by 17% to 1,535p in early trading this morning, after the company announced a share consolidation relating to its return of cash to shareholders.

So what: At IMI’s general meeting last week a proposal was approved for the FTSE 100 member to return £620m to shareholders.

The group, which specialises in fluid control systems, revealed the terms of a proposed return of 200p a share to investors, following the completion of the sale of its beverage dispense and merchandising divisions.

IMI announced in December that it had reached an agreement to sell the two divisions for $1.1bn.

Mark Selway, the chief executive, commented:

“IMI is now a specialist flow control group entirely focused on industrial end markets. This strong foundation creates greater opportunities for technical and operational synergies and provides an excellent platform for future growth.”

Now what: Shareholders can elect to receive their cash proceeds as an immediate income payment, and immediate capital payment, a deferred capital option or a combination of these choices.

The choice you make depends on your tax position. For instance — a capital payment will potentially be subject to capital gains tax, and capital gains are taxed at a lower rate in the UK than income. There is a £10,900 capital gains allowance each year and the capital payment may be more suitable for investors who don’t hold their shares in a tax wrapper like an ISA.

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> Mark does not own shares in IMI.