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UPDATE 3-GKN-owner Melrose to return $1 bln to shareholders after Nortek sale

* Return plans equal 15 pence per existing ordinary share

* Sold power business for 100 mln stg last week

* Says group trading in line with expectations

* Shares rise as much as 3% in morning trade (Adds share movement, detail)

June 22 (Reuters) - Britain’s Melrose Industries on Tuesday laid out plans to return about 730 million pounds ($1.01 billion) in cash to its shareholders after the company sold its Nortek Air Management business, sending its shares 3% higher.

Melrose, which specialises in acquiring and turning around underperforming businesses before selling them on, agreed to sell Nortek in April and planned to use proceeds to pay down debt, reduce a British pension deficit and return cash.

“We have taken a conservative view for the level of the current return of capital, but if markets continue to recover, we expect to announce a further significant return next year,” CEO Simon Peckham said.

Melrose’s current return plans equal 15 pence per existing ordinary share for shareholders, it said, adding that there were some encouraging signs for its aerospace division after the coronavirus pandemic hit it hard.

The division had squeezed out a modest profit in the first quarter compared with a loss last year, helped by cost cuts.

London-listed Melrose, which has also warned growth would be hit by a shortage of chips in the automotive supply chain, said the group was trading in line with expectations ahead of interim results on June 30.

Shares of the company were up 1.6% at 161 pence by 0717 GMT. The stock lost nearly 26% of its value last year and is down 11% for 2021 as of Monday’s close.

Melrose said there was recovery in demand for cars and powder metals, and these divisions, including automotive, had been “significantly” cash generative.

The owner of GKN, which supplies parts to carmakers such as Volkswagen, also said last week it had disposed of another business, Brush, for 100 million pounds. Brush provides turbogenerators, transformers and related power services.

The capital return and share consolidation, through which the return will be executed, would require approval from shareholders, Melrose said.

$1 = 0.7194 pounds Reporting by Pushkala Aripaka in Bengaluru; editing by Shounak Dasgupta and Jason Neely

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