FOOD group Iceland is looking to free up nearly £330m from its share reserves to enable a distribution to its shareholders.

Major stakes in the privately-owned Deeside retailer are controlled by the administrators of two failed Icelandic banks who are keen to exit the group, which has annual sales of more than £2bn.

The capital reorganisation would enable shareholders to distribute cash while also simplifying the group’s structure.

Iceland Foods Group and three intermediate holding companies have lodged notices at the High Court about their intentions to reduce the capital of the businesses. The move is subject to confirmation at the Royal Courts of Justice next Wednesday.

The group company is looking to reduce its capital by £268.6m – the value of its merger reserve, which relates to shares issued when the group acquired Icebox Holdings in 2007.

Its subsidiary companies – Icebox Holdings, Icebox Midco and Ice Acquisitions – are looking to reduce their capital to £1 each, and Holdings plans to cancel its share premium account. The changes would release a further £59.5m. The entire share capital of the subsidiaries is ultimately held by Iceland Foods Group.

This process enables money to be returned to shareholders that would not otherwise be able to be paid out as dividends.

The retailer’s shares fell into the hands of Icelandic banks Landsbanki and Glitnir Banki after the failure of retail group Baugur. However, both banks have also since collapsed, placing the controlling interest in the hands of administrators.

Iceland’s management trio of managing director Andy Pritchard, finance director Tarsem Dhaliwal and chief executive Malcolm Walker hold the vast majority of the remaining shares.

Iceland Foods made a pre-tax profit of £110m on sales of £2.26bn in the 2010 financial year, with the figures showing rises of 27% and 10% respectively.

The group employs about 22,000 people at more than 770 stores.

Mr Walker founded Iceland in Oswestry in 1970, moved its head office to Deeside in 1979, and it was floated on the London Stock Exchange five years later, when it had 81 outlets.

Mr Walker was ousted as chairman in 2001, in the wake of a controversial sale of shares worth £13.5m, but he returned to the board in 2005 when a private consortium headed by Baugur acquired the retailer’s then parent company, The Big Food Group, for £326m.