Summary
Quest Diagnostics Incorporated (DGX) announced on April 23, 2013, that it has entered into an accelerated share repurchase agreement (ASR) valued at approximately $450 million with Goldman, Sachs & Co. This ASR is part of the company's ongoing common stock repurchase program and signifies a substantial commitment by Quest Diagnostics to return capital to shareholders. The company has already made the $450 million payment and received an initial tranche of shares, with the final number of shares repurchased to be determined based on market prices over a specified period.
Key Highlights
- 1Quest Diagnostics entered into a $450 million accelerated share repurchase (ASR) agreement for its common stock.
- 2The ASR is part of the company's existing stock repurchase program.
- 3The company made a $450 million payment on April 22, 2013.
- 4Quest Diagnostics received an initial 7,242,489 shares of common stock on April 22, 2013.
- 5The final number of shares repurchased will be determined by the average daily volume-weighted average price during a repurchase period, less a discount.
- 6The ASR agreement includes provisions for potential adjustments, early termination, and customary representations and warranties.
- 7The ASR transaction is expected to be completed by the third quarter of 2013.
Frequently Asked Questions
An ASR is a transaction where a company buys back its own stock from a financial institution (like an investment bank). The company makes a payment upfront, receives an initial block of shares, and the final number of shares repurchased is determined later based on market prices over a set period. It's a way for companies to quickly reduce their outstanding shares.
Quest Diagnostics is repurchasing its stock as part of its ongoing common stock repurchase program. This action typically signals management's belief that the company's stock is undervalued and is a way to return capital to shareholders, potentially increasing earnings per share (EPS) by reducing the number of outstanding shares.
Share repurchases, especially significant ones like this $450 million ASR, can be viewed positively by investors. By reducing the supply of shares in the market, buybacks can create upward pressure on the stock price. Additionally, a reduced share count can lead to higher earnings per share, making the stock appear more attractive.
The ASR agreement is expected to be completed during the third quarter of 2013. The exact number of shares that will ultimately be repurchased will be determined by the average volume-weighted average price of the stock during a specified repurchase period.