Challenger Financial Group is emulating the Ten Network and buying back its shares in an effort to put some sort of underpinning in place for its weak share price.
The Ten Network announced last week that it would buy up to 10% of its shares: with CanWest of Canada, Win Corporation of Australia and big fund manager, 452 Capital not accepting into the offer, the buyback probably won’t get the full 10%.
Ten shares bounced from $1.35 at the time of the offer to $1.54 last Friday. The shares fell in yesterday’s weaker market, closing down 4.5c at $1.50
But it will ensure there will be support in the market for Ten over the next 12 months which could be quite tough times with ad revenues forecast to fall (or at best flatten out) as the economy slows.
Ten has already warned of a 10% drop in 2008 earnings and the buyback came three weeks after that surprise announcement. Ltd says it will buy back up to 10% of the company’s issued capital through an on-market share buyback program.
Challenger also said it had completed the sale of its financial planning business for $130 million in cash.
News of the buyback saw the shares rise 5% to $2.16 after peaking at $2.17 in the weak market, so the shares had an initial impact
Challenger said it had a low debt position, a strong capital surplus in its prudentially regulated Life Company and strong operating cash flows.
"This has created the opportunity to commence an on-market share buy-back program from 21 July 2008," the company said in the statement and the total number of shares purchased would depend on market conditions and evaluated against alternative investment opportunities through the buy-back period.
"The company has previously provided guidance on its 2H08 dividend which is expected to be 7.5 cents per share re-affirming the board’s confidence in underlying profit," Challenger said.
With 632 million shares on issue, Challenger could spend up to $140 million in the buyback at present prices.
There was no word if James Packer would accept in respect of the 20% of Challenger his private company, Consolidated Press, currently holds.
