The London Stock Exchange plc says that it will follow through on its plan to return £510 million ($1.016 billion) to shareholders by issuing a new class of shares.

On February 17, the board of the LSE announced its intention to return approximately £510 million to shareholders equivalent to 200 pence per existing share and subsequently commence an ongoing share buyback program of up to £50 million per annum. It says that the move allows it to return capital to shareholders whilse making the balance sheet more efficient and ensuring sufficient resources are available to invest in future growth.

The return will be effected through the issue of B shares following the introduction of a new holding company, London Stock Exchange Group plc via a court approved scheme of arrangement. Exchange Group will become the holding company of the exchange and it will replace the exchange as the listed entity.

Under the terms of the proposed scheme, shareholders holding existing ordinary shares in the exchange will receive: three new ordinary shares in Exchange Group for every four existing ordinary shares in the exchange; and, one B share in Exchange Group for every one existing ordinary share in the exchange. Shareholders will not have to pay anything for these new ordinary shares and B shares in Exchange Group.

The arrangement requires the approval of London Stock Exchange plc’s shareholders at a shareholders’ meeting to be held on April 19 and the subsequent approval of the High Court (expected to be sought on May 12).

“Following the lapse of Macquarie’s offer, we are pleased to provide details of the £510m (200 pence per share) capital return announced last month. Subsequent to the return, the company intends to initiate a share repurchase programme of up to £50m per annum. These substantial returns of capital are made possible by the company’s strong growth and robust cash generation. They will improve the efficiency of the balance sheet while leaving us capacity to invest for the future,” said Chris Gibson-Smith, chairman of the exchange.

J.P. Morgan Cazenove Ltd. is acting exclusively as financial adviser and broker for the LSE.