Woolworths Group Limited (ASX: WOW) is a multi-billion company from the consumer staples sector. WOW announced the successful completion of A$1.7 billion off-market Buy-Back and subsequent cancellation of shares on the same day.
It is reported that the Buy-Back saw strong demand resulting in 84.68% scale back. This scale back was designed to compensate shareholders facing disadvantages due to small holding. Subject to exclusions due to any minimum price conditions, a scale back was applied after priority allocation of 180 shares (or less) were bought back from Eligible Shareholders who offered their shares at a 14% discount and/or as a Final Price Offer.
The company informed that the successful eligible shareholders would have their 15.32% of their shares (in excess of 180 shares offered) offered bought back and if the offered shares are less than 180 shares, all the offered shares would be bought back. WOW did not Buy-Back shares conditional upon a minimum price above the Buy-Back price along with shares offered at a discount of 10-13%.
Reportedly, Australian Tax Office (ATO) class ruling is expected by the end of June 2019, and the verdict would confirm that the A$24.15 dividend component of Buy-Back price should be treated as fully franked dividend for Australian tax purposes only. Whereas, with respect to Australian capital gain tax purposes, the deemed capital proceeds would reportedly be A$7.50.
It is reported that the payment via direct credit for repurchase under Buy-Back of shares would commence by 30 May 2019 and subsequently a statement would be sent on that day. Shares which were offered for Buy-Back but not bought back would be available for trading on 28 May 2019, told WOW.
WOW also released information confirming the cancellation of bought back shares in line with ASIC.
Key Outcome from Buy-Back (Source: Company’s Announcement)
Gordon Cairns, Chairman of Woolworths Group, stated that the results of Buy-Back depict strong level investor interest and Board’s commitment to return the proceeds from the sale of Woolworths’ Petrol business. Additionally, he asserted that the balance sheet of the group remains strong to allow flexibility for future growth as Board continues to focus on creating long term shareholder value.
WOW 2019 Third Quarter Sales (Source: Company’s Announcement)
During early May, WOW also released its third-quarter sales results, which depicted an improved sales momentum. Australian Food sales improved with 4.7% change (easter adjusted) on the back of lower deflation and more settled weather.
The timing of new year and weather pushed the Endeavour Drinks business to record a +6.4% (easter adjusted) change in sales meanwhile New Zealand Food witnessed sales growth of 2.9% (easter adjusted) driven by strong sales in fruit, vegetables and perishables. However, store closure in the previous period negatively impacted the New Zealand Food’s sales. Big W recorded a change of +5.6% (easter adjusted) driven by significant performance of Leisure, Home and Everyday with stronger apparel and winter sales. Hotels witnessed a growth of +2.7% (easter adjusted) on the back of bars and food business growth coupled with the timing of the new year.
WOW last traded at $32.090, down 0.65%, on 28 May 2019. Over the past 12 months, the stock witnessed a positive price change of 12.04% including an upside of 11.46% recorded in the past three months.
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