Daimler has opted to purchase back 10% of its own stock at a total price of around $9 billion. They were actually in the process of buying back said stock when the markets went all funky, but have decided it's a good time to restart the process. This is another sign that Daimler's at least trying to get a more firm fiscal footing, with this move ultimately allowing the company to use cheaper debt capital instead of money raised from shares for expansion. That, in turn, will allow them to reduce the cost of making serious investments... like buying a great soft-serve machine for the corporate cafeteria. Press release below the jump.
Daimler to start new share buyback program
Stuttgart - For the further optimization of Daimler's capital structure, the Board of Management of the company decided to carry out a new share buyback program. The Supervisory Board of Daimler AG has approved this decision.
In exercise of the authorization granted by the Annual Meeting of April 9, 2008, the decision of the Board of Management allows for the buyback of 10% or approximately 96.4 million of the outstanding shares for a maximum amount of €6 billion. In order to optimize the buyback, shares may also be acquired with the use of derivatives.
Daimler's capital structure is to be further optimized with the goal of reducing the use of equity capital, which is more expensive than debt capital. This will avoid investment decisions being limited by excessively high capital costs.
The share buyback program will be carried out on the stock exchange, whereby derivatives may also be traded outside the stock exchange.
The Board of Management decision limits the period of the share buyback until the Annual Meeting on April 8, 2009.
The shares acquired will later be cancelled without any reduction in Daimler's share capital. It will also be possible to use some of the shares to serve stock option plans.
In line with the decision by the Board of Management, the share buyback will be managed by a bank, which will make its decisions on the timing of individual share purchases and the use of derivatives independently and without any influence from Daimler AG.
The company started its first share buyback program at the end of August 2007. By March 28, 2008, 99.8 million shares had been bought back for €6.2 billion.
The technical details of the share buyback program are as follows:
In accordance with the authorization granted by the Annual Meeting, the price paid by Daimler AG for each share (excluding transaction costs) purchased through the stock exchange may not be more than 5% higher or lower than the price determined at the opening of Xetra trading at the Frankfurt am Main Stock Exchange.
With the possible use of derivatives, according to the resolution of the Annual Meeting, the price paid by the company for options may not be substantially higher and the sale price received by the company may not be substantially lower than the theoretical market value of the options calculated using recognized financial mathematical methods, whereby the agreed exercise price is one of the factors to be taken into consideration.
The derivatives used (stock options) may not be applied for the acquisition of more than 5% of the share capital as of April 9, 2008.
The exercise price of the options (excluding transaction costs, but taking into consideration the option bonus received or paid) may not be more than 10% higher or lower than the average closing price in Xetra trading at the Frankfurt am Main Stock Exchange on the last three days of trading before the conclusion of the respective option transaction.