8-KAcquisitions & DispositionsMaterial AgreementsFinancial Events+1

AGILENT TECHNOLOGIES, INC. 8-K Report, Material Agreement (Feb 2, 2006)

Filed February 2, 2006For Securities:A

Summary

Agilent Technologies, Inc. (Agilent) has filed an 8-K report on February 2, 2006, detailing a significant financial transaction. On January 27, 2006, its wholly-owned subsidiary, Agilent Technologies World Trade, Inc. (World Trade), entered into a Master Repurchase Agreement with Fenway Capital, LLC, for $1.5 billion. This agreement involves the sale and subsequent repurchase of 15,000 Class A Preferred Shares of Agilent Technologies (Cayco) Limited, Agilent's subsidiary, with the repurchase date set for January 27, 2011. Agilent plans to utilize $700 million of the proceeds to fully repay a credit facility used for its previously announced share repurchase program. The remaining proceeds will be used to fund further common stock repurchases under the program and for general corporate purposes, signaling a continued focus on returning capital to shareholders. The company has approximately $1.2 billion remaining in its share repurchase authorization. This transaction will result in approximately $1.6 billion of Agilent's investments being classified as restricted on its balance sheet.

Key Highlights

  • 1Agilent subsidiary entered into a $1.5 billion repurchase agreement for preferred shares of its Cayco subsidiary.
  • 2Proceeds will be used to repay a $700 million credit facility and fund further share repurchases.
  • 3The repurchase agreement has a term of five years, maturing on January 27, 2011.
  • 4Agilent Technologies, Inc. provided an unconditional guarantee for its subsidiary's obligations under the repurchase agreement.
  • 5Quarterly payments to the counterparty will be based on three-month LIBOR plus 28 basis points.
  • 6The transaction will result in approximately $1.6 billion of Agilent's investments being classified as restricted on its balance sheet.
  • 7This financing appears to be an alternative method to fund ongoing share repurchases and manage liquidity.

Frequently Asked Questions

The primary purpose of the repurchase agreement is to provide Agilent with $1.5 billion in funding. A significant portion ($700 million) is used to repay an existing credit facility, while the remainder will be used to continue Agilent's common stock repurchase program and for general corporate purposes. This transaction effectively provides liquidity to support shareholder capital return initiatives.

The repurchase agreement will result in approximately $1.6 billion of Agilent's investments being classified as 'restricted' on its balance sheet as of January 31, 2006. This means these assets are encumbered or otherwise not freely available for use by the company.

Agilent's subsidiary, World Trade, is obligated to make quarterly payments to the counterparty based on three-month LIBOR plus 28 basis points per annum. Additionally, the agreement contains provisions for potential 'make-whole' premiums and additional payments to Merrill Lynch under specific circumstances related to financing the repurchase and the stability of the counterparty's liquidity arrangements.

Agilent Technologies (Cayco) Limited is a wholly-owned subsidiary of Agilent, established in the Cayman Islands. It is presented as a separate legal entity with its own assets and liabilities. Its preferred shares are being used as collateral in the repurchase agreement, a common financial structure to secure funding.