8-KOther Events

QUEST DIAGNOSTICS INC 8-K Report, Corporate Update (May 20, 2016)

Filed May 20, 2016For Securities:DGX

Summary

Quest Diagnostics Incorporated (DGX) announced on May 19, 2016, that it has entered into an Accelerated Share Repurchase (ASR) agreement with Morgan Stanley & Co. LLC to buy back approximately $250 million of its common stock. This ASR is part of the company's ongoing common stock repurchase program, indicating a strategic move to return capital to shareholders and potentially boost earnings per share. The company made an initial payment of $250 million on May 20, 2016, and received approximately 2.79 million shares immediately. The final number of shares repurchased will be determined by the volume-weighted average price during a specified period, adjusted for a discount and other terms. This transaction is expected to conclude by the third quarter of 2016, signaling a significant capital allocation decision by Quest Diagnostics.

Key Highlights

  • 1Quest Diagnostics entered into an Accelerated Share Repurchase (ASR) agreement valued at $250 million.
  • 2The ASR is part of the company's existing common stock repurchase program.
  • 3An initial payment of $250 million was made on May 20, 2016.
  • 4The company received an initial 2,790,179 shares of common stock on May 20, 2016.
  • 5The final number of shares repurchased will be based on the volume-weighted average price during a repurchase period, with a discount.
  • 6The transaction is anticipated to be completed in the third quarter of 2016.

Frequently Asked Questions

An ASR agreement is a transaction where a company buys back its own stock from an investment bank (in this case, Morgan Stanley). The company typically pays a lump sum upfront, receives a significant portion of the shares immediately, and the final number of shares repurchased is determined later based on market prices during a specified period, often with a discount.

The repurchase is part of Quest Diagnostics' common stock repurchase program. Companies often repurchase shares to return capital to shareholders, potentially increase earnings per share (EPS) by reducing the number of outstanding shares, and signal confidence in the company's future prospects.

Share repurchases can be supportive of stock prices by increasing demand. By reducing the number of outstanding shares, the company's earnings will be spread over fewer shares, which typically leads to an increase in earnings per share (EPS), assuming net income remains constant or grows.

The ASR agreement is expected to be completed during the third quarter of 2016.