What is an accelerated share repurchase (ASR) transaction?

An accelerated share repurchase (ASR) is a transaction where a company buys back its own stock from an investment bank (in this case, Citibank) at an accelerated pace. The company typically makes an initial payment, and in return, receives a portion of the shares immediately. The final number of shares repurchased is usually determined later based on the stock's trading price over a defined period, potentially leading to additional shares or a cash adjustment.

How many shares did Gilead repurchase, and at what price?

In the initial phase of the ASR, Gilead received approximately 10,999,433 shares for its $750.0 million payment. The initial repurchase price was based on the average daily volume-weighted average share prices during a specified period, resulting in an average price of $46.49 per share for this initial tranche.

Will Gilead receive more shares or potentially make another payment after the initial transaction?

Yes, Gilead may receive additional shares from Citibank by April 2009, subject to extensions. The number of additional shares will depend on the average daily volume-weighted average prices of GSI common stock during a subsequent period, adjusted by a predetermined discount. Gilead has the discretion to receive this settlement in cash or additional shares in certain circumstances.

What is the impact of this ASR on Gilead's outstanding shares?

The shares repurchased under this accelerated share repurchase agreement will be retired. This means they will be permanently removed from the total number of outstanding shares, which can positively impact earnings per share (EPS) and potentially increase the stock price by reducing supply.

GILD 8-K: Material Agreements & Financial Events

Summary

Gilead Sciences, Inc. (GILD) announced on October 21, 2008, a significant step in its capital allocation strategy with an accelerated share repurchase (ASR) transaction. The company entered into an agreement with Citibank, N.A. to repurchase $750.0 million of its common stock. This transaction is a component of a larger $3.0 billion share repurchase program previously authorized by the board of directors in October 2007. The ASR agreement involves an initial payment of $750.0 million, in exchange for which Gilead has received approximately 10.999 million shares. The initial share price for this transaction was set at $46.49, based on average trading prices during a specified period. Gilead expects to receive additional shares by April 2009, depending on the average trading price over an initial hedge period, subject to certain minimum and maximum delivery provisions. The repurchased shares will be retired, reducing the total number of outstanding shares.

Key Highlights

1Gilead Sciences entered into an accelerated share repurchase (ASR) transaction valued at $750.0 million.
2The ASR is part of a larger $3.0 billion share repurchase program authorized in October 2007.
3The company made an initial payment of $750.0 million to Citibank.
4Gilead received approximately 10,999,433 shares in the initial phase of the ASR at an average price of $46.49 per share.
5The final number of shares repurchased will be determined based on the average share price over a specified period, with potential for adjustments.
6Gilead has the discretion to receive additional shares or a cash settlement under certain circumstances.
7All shares repurchased under this ASR agreement will be retired, reducing the company's outstanding share count.

GILEAD SCIENCES, INC. 8-K Report, Material Agreement (Oct 21, 2008)

Summary

Key Highlights

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