The second biggest US automaker has announced it decided to get back shares worth $1.8 billion, in a move designed to reduce company stock dilution.
The dilution comes from the automaker granting stock to some of its executives as perks for positive results and it also aims with the repurchase to balance shares that were possibly issued to convertible debt holders.
“These actions are consistent with our overall capital strategy to take anti-dilutive actions and position ourselves to further reduce automotive debt, ” said Chief Financial Officer Bob Shanks.
“This is a positive sign that should help the stock over the long term,” said Joe Phillippi, a veteran auto analyst and president of AutoTrends Consulting in Andover, New Jersey. “Some shareholders will say: ‘Increase the dividend.’ And if the earnings numbers continue to roll, some free cash flow will be set aside for increasing the dividend.”
The carmaker is buying back 103 million shares to offset debt conversions of around $883 million in 4.25 % senior convertible notes, which are due Nov. 15, 2016. Ford also said it has a limited right to close them faster, this November, with the possibility to settle them in cash or shares.
Also, 12.6 million shares would be repurchased to balance the employee incentive compensation – which also included stock granted to CEO Mulally. The same procedure was undertaken in 2012 and 2013.