Posts tagged 'Share buybacks'

A bull market without buyers

A particular kind of buyer, at any rate. Talk of corporate cash piles has become cliché, while private equity has been turning a corner for so long it has entered some sort of fee-paying mobius strip. But it remains the case that stock markets have gone up without many purchases of companies in their entirety.

For illustration, the last decade of deal activity as a proportion of market capitalisation, from Nikolaos Panigirtzoglou and team at JP Morgan. Read more

The Spanish bank buy-back riddle

So, this is a bit odd. Why would some Spanish banks, which have such high capital needs right now, have been engaged in fairly significant share repurchases over the past few months?

Spanish banks such as Bankia and BBVA have been buying their own stock in increasing quantities since February, with Banco Popular much more active than the rest recently. Read more

Comeback for US accelerated buy-backs

US companies are turning to a counter-intuitive strategy to return cash to shareholders, the FT reports: shorting their own stock. As companies with record cash on their balance sheets embark on a spree of share buybacks, a handful are using a tactic not seen since before the financial crisis, known as “accelerated stock repurchases”, or ASRs. In an ASR, the company instructs its broker to immediately short the full amount, but retires rather than sells the borrowed shares. The broker then buys shares to cover the short, with the company agreeing to cover any losses on the trade. Although such deals represent a small sliver of the buyback market, ASRs make up $8.5bn so far this year, putting them on track to exceed last year’s total of $11bn.

GE plans $12bn share buy-back

General Electric plans to make share buy-backs totalling about $12bn over the next few years, its chief executive said on Wednesday, joining a succession of US companies setting out plans for large repurchase programmes, the FT reports. Low interest rates and the shortage of profitable investment opportunities have encouraged several US groups to announce multibillion-dollar share buy-backs. At an investor conference in Florida, Jeff Immelt, GE’s chairman and chief executive, said: “I want to reduce the float . . . I’d like to get the float back down to where it was pre the offering in 2008.” Mr Immelt reiterated that GE planned no further acquisitions for the time being, having spent $11bn on energy companies over the past few months, and held out the prospect of continued growth in GE’s dividend, which has been rising again having been cut by two-thirds in 2009.

Debt-financed buybacks on the increase

Blue-chip companies from Philip Morris to AT&T are taking advantage of cheap debt to finance share buy-backs and mergers and acquisitions activity at an accelerated pace, the FT reports. According to Dealogic data, companies with investment-grade ratings have borrowed more than $200bn in the dollar-bond market, up from $134bn by this time last year. The trend could mark a turning point for the credit cycle and the hoard of cash built up by companies since the crisis. While it’s often unspecified how companies plan to use bond sale proceeds, perhaps 20 per cent of borrowings will be used for M&A financing, a proportion last seen in 2006 and 2007.

BHP boosts buy-back plan to $10bn

BHP Billiton has more than doubled its share buy-back scheme to $10bn after reporting record first-half profits, up 72% to $10.5bn, on the back of boom prices for iron ore, coal and copper, reports the FT. The strong result highlights pressure on the Anglo-Australian miner to return more cash to shareholders after the failure of two large transactions – the plan to combine its Pilbara iron ore operations in Australia with those of Rio Tinto, and its $39bn hostile bid for Canada’s PotashCorp. BHP’s move to expand its buy-back from $4.8bn to $10bn follows Rio’s decision to buy back $5bn of its shares after full-year pre-tax profits surged by 162% to $20.6bn. Bloomberg adds that CEO Marius Kloppers damped speculation that BHP would seek another acquisition, saying it would invest $80bn to develop its own mines and fields. The Telegraph meanwhile profiles Kloppers.

Rio Tinto set for $5bn buy-back

Rio Tinto is to buy back $5bn of shares, after a year in which soaring iron ore prices allowed it to slash debt and more than double profits, reports the FT. The multinational mining company’s final dividend is 20% higher than earlier guidance at $1.08 per share, against $0.45 in 2009. It said it would buy back $5bn in shares before end-2012. The move comes less than two years after it asked investors for a $15.2bn cash infusion through a rights issue, and reflects surging prices for iron ore, copper, coal and aluminium amid a sharp resurgence of China-led demand for industrial raw materials. Higher commodities prices alone added $9.5bn to underlying earnings in 2010, which more than doubled from $6.3bn to $14bn. All very well, says Lex, but Rio will need to keep repeating such results if its shares, trading on 7.8 times forecast current year earnings, are to close the gap with less iron ore-dependent rivals Anglo American and BHP.

Pace of US equity buy-backs accelerates

US companies have announced share buy-backs at the fastest pace since the fall of Lehman Brothers as companies search for ways to put their record cash holdings to work in a still nascent economic recovery, the FT reports. Buy-backs announced by 24 US groups were $27.3bn last week, topping $26.5bn the previous week and the most in any week since September 2008, according to figures compiled by TrimTabs Investment Research. Live Trading News says the largest percentage of buy-backs in in the period have come from consumer and technology groups.