What is an accelerated share repurchase (ASR) agreement?

An accelerated share repurchase (ASR) agreement is a transaction where a company buys back its own stock directly from an investment bank, like Goldman Sachs in this case. The company pays a lump sum upfront, and the investment bank delivers a portion of the shares immediately, with the rest delivered later based on the average market price over a set period. This allows for a rapid execution of a significant share buyback.

How does the 'collared' nature of this ASR agreement affect the number of shares repurchased?

The 'collared' structure means there's a pre-defined minimum and maximum number of shares Gilead will repurchase. While the company pays a fixed $500 million, the final number of shares received will depend on the average stock price during the repurchase period. If the average price is higher than expected, Gilead will receive fewer shares (but no more than the maximum), and if it's lower, Gilead will receive more shares (but no fewer than the minimum), ensuring a predictable outcome within defined limits.

What is the purpose of this share repurchase program?

The primary purpose of share repurchase programs is typically to return capital to shareholders, increase earnings per share (EPS) by reducing the number of outstanding shares, and signal management's confidence in the company's valuation and future prospects. This specific ASR is part of a larger $3 billion program, indicating a significant commitment to these objectives.

When will Gilead receive all the shares from this ASR transaction?

Gilead will receive an initial delivery of approximately 7.2 million shares on March 5, 2008. The remaining shares, representing the balance of the minimum number of shares to be repurchased, will be delivered after an initial hedge period. The company expects to receive the final balance of shares no later than June 25, 2008, subject to potential extensions outlined in the agreement.

GILD 8-K: Material Agreements & Financial Events

Summary

Gilead Sciences, Inc. (GILD) announced on March 3, 2008, a material definitive agreement for an accelerated share repurchase (ASR) program with Goldman Sachs & Co. This transaction involves up to $500 million of the company's common stock and is part of a larger $3 billion repurchase program previously authorized by the board. The ASR program is structured as a "collared" transaction. Gilead will pay $500 million on March 5, 2008. In return, Goldman Sachs will initially deliver approximately 7.2 million shares, representing about 75% of the minimum anticipated repurchase, on the same day. The final number of shares repurchased will be determined based on the volume-weighted average share prices over a specified period, with a minimum and maximum number of shares set by the agreement. The company expects to receive the balance of the shares no later than June 25, 2008, and these repurchased shares will be retired.

Key Highlights

1Gilead Sciences entered into an accelerated share repurchase (ASR) agreement for up to $500 million.
2The ASR transaction is part of a previously announced $3 billion share repurchase program.
3The company will pay $500 million to Goldman Sachs on March 5, 2008.
4Goldman Sachs will initially deliver approximately 7.2 million shares (around 75% of the minimum expected repurchase) on March 5, 2008.
5The final number of shares repurchased will be determined by the volume-weighted average share prices during a specified period.
6The ASR agreement includes provisions for a minimum and maximum number of shares to be repurchased.
7Repurchased shares under this program will be retired.

GILEAD SCIENCES, INC. 8-K Report, Material Agreement (Mar 3, 2008)

Summary

Key Highlights

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