8-KOther Events

ALLSTATE CORP 8-K Report, Corporate Update (Dec 17, 2018)

Filed December 17, 2018For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corp (ALL) announced on December 14, 2018, an accelerated share repurchase (ASR) agreement with Wells Fargo to buy back $1 billion of its outstanding common stock. This transaction is a significant component of the company's previously announced $3 billion repurchase program initiated on October 31, 2018. The majority of shares are expected to be delivered at the ASR's inception, with final pricing determined by market-based average prices over the repurchase period. This move signals a strong commitment from Allstate's management to return capital to shareholders and suggests confidence in the company's valuation and future prospects. For investors, the ASR implies a potential reduction in share count, which could boost earnings per share (EPS) and signal financial strength. The company has already repurchased $1.35 billion worth of shares in 2018 prior to this ASR, demonstrating a consistent strategy of capital allocation towards share buybacks.

Key Highlights

  • 1Allstate entered into a $1 billion Accelerated Share Repurchase (ASR) agreement with Wells Fargo.
  • 2The ASR is part of a larger $3 billion share repurchase program announced on October 31, 2018.
  • 3A majority of the shares under the ASR are expected to be received by Allstate at the agreement's inception.
  • 4The final repurchase price will be based on the volume-weighted average price of Allstate's common stock during Wells Fargo's market purchases.
  • 5As of December 13, 2018, Allstate had already repurchased $1.35 billion of its common stock in 2018.
  • 6Shares repurchased under the ASR will be held in treasury.

Frequently Asked Questions

An Accelerated Share Repurchase (ASR) agreement is a contract where a company agrees to buy back a significant amount of its own stock from a bank (in this case, Wells Fargo) quickly. The bank usually buys the shares on the open market and delivers them to the company. This allows the company to retire a large number of shares in a shorter timeframe than traditional open-market repurchases.

Allstate is undertaking this significant share repurchase program to return capital to its shareholders. It also indicates management's belief that the company's stock is undervalued and represents a good investment. Reducing the number of outstanding shares can also increase earnings per share (EPS), making the stock potentially more attractive.

The final purchase price per share and the total number of shares repurchased will be determined at the conclusion of the agreement. The price will be based on the average of the daily volume-weighted average prices of Allstate's common stock during the period Wells Fargo is making its market purchases. If there is a difference between the initial estimated cost and the final calculated cost, Allstate may pay the difference in cash or, under certain conditions, issue additional shares.

Receiving the majority of shares at the agreement's inception means Allstate gets the benefit of repurchasing those shares immediately. This provides faster execution and allows the company to immediately reduce its outstanding share count, potentially impacting EPS calculations sooner and demonstrating quick capital return to shareholders.