Woolworths shares eased yesterday after the retailer revealed it had completed its mammoth $704 million share buyback.
The news saw the shares sold off to a day’s low of $28.94, down 76c, or 2.5%.
They then recovered slowly to end the day down 50c at $29.20.
The reason for the fall in price was selling by big banks who had been caught by the success of the buyback with too many shares they had bought to help clients (institutions) accepting into the buyback would not lose their index weightings.
Market sources said the overhang of shares was around 3 million, and with more than 11 million shares traded yesterday, that would indicate much of the overhang has been sold off.
Woolies said the buyback had overwhelming support from shareholders which is a bit of an understatement seeing the real level of tenders into the offer was around $5.2 billion for the $704 million worth of purchases.
The final buy-back price was $25.62 a share after 27.5 million shares were purchased from shareholders who tendered their shares at a 14% discount or as final price tenders.
Woolies CEO said in the statement “We have now returned more than $1 billion to shareholders in the 2010 calendar year – a combination of this $704 million off-market buy-back plus a $325 million on-market buy-back completed in the first half of the calendar year.
"This is in addition to the $1.3 billion of fully franked dividends paid to shareholders in the 2010 financial year”.
The final buy-back price was above the minimum prices set in the original tender form, Woolworths said.
The shares purchased represent 2.2% of Woolworths’ issued capital.
Woolworths bought 201 shares from each shareholder before scaling back tenders.
Shareholders who held 306 shares or fewer and successfully tendered all their shares had their entire shareholding bought back, Woolworths said.
All other successful tenders were scaled back by 88.2%, the company said, meaning they only got 11.8% of what they tendered.
Woolworths said it expects the final class ruling to be issued by the Australian Tax Office to confirm that $22.54 per share of the buy-back price will be treated as a fully franked dividend.
It also expects capital proceeds of $6.00 for capital gains purposes, comprising $3.08 for the capital component and a $2.92 excess of the tax value over the buy-back price.
Shareholders can expect payment for their shares by next Monday.
The retailer is due to reveal first quarter sales later this month.
