- Ampol has closed an off-market buy-back of 11.4 million shares worth A$300.4 million.
- The objective is to achieve a balance between returning shareholders’ capital, retaining the flexibility for investments, and maintaining a robust balance sheet.
- The buy-back is expected to increase the Company’s EPS and ROE.
Australian leading transport fuel company Ampol Limited (ASX:ALD) has successfully completed an off-market share buy-back program. The size of the buy-back scheme was A$300.4 million, which involved 11.4 million shares.
There was a 14% discount on the market price of the shares for buy-back. The market price was fixed at A$30.6226, which is an average VWAP for 5 trading sessions. At the 14% discount, the buy-back price stood at A$26.34 per share.
Buy-Back Shares To Be Cancelled
The main objective of the buy-back is to maintain a sustainable business along with returning capital to shareholders. Moreover, the aim is to retain the flexibility to invest capital for future growth opportunities.
Source: 2020 Investor Day Presentation
The shares bought back by the Company will be cancelled, thus the total number of shares will be reduced by 11.4 million. This represents around 5% of the issued capital.
Why Ampol Opted For Buy-Back?
After analysing various alternatives for returning shareholders’ capital, off-market buy-back was considered to be the most feasible and appropriate option. The decision was followed by factors like:
- Off-market buy-back helped Ampol to get the shares at a 14% discount. This meant that more number of shares could be bought than the shares purchased from the on-market.
- The shareholders will get a better tax benefit in the off-market sell of shares than the on-market.
- The improved return on equity and earnings per share will be more beneficial to the existing shareholders.
- No brokerage for shareholders was involved or charged in the buy-back process.
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Share Price Movement
The Company’s update on the completion of the discounted buy-back of shares at a price of A$26.34 has impacted the share price movement today. The stock traded at A$29.27, down by 4.81%, at 1:10 PM AEDT on 25 January 2021. The Company has a market cap of A$7.67 billion.