What is an accelerated share repurchase (ASR)?

An accelerated share repurchase (ASR) is a transaction where a company buys back a significant amount of its own stock from an investment bank, typically in a single lump sum. The company usually receives the shares immediately or within a short period, and the final number of shares repurchased is determined later based on the average market price over a specified period, often with a discount.

Why is KLA-Tencor repurchasing its stock?

KLA-Tencor is repurchasing its stock as part of a capital allocation strategy to return value to shareholders. Management likely believes the company's stock is undervalued or sees it as an efficient way to manage its capital structure and potentially increase earnings per share (EPS) by reducing the number of outstanding shares.

How will the ASR impact the number of outstanding shares?

The $750 million ASR is expected to significantly reduce the number of KLA-Tencor's outstanding common shares. The exact number of shares will be determined by the volume-weighted average price during a future period, subject to a minimum determined at that time, effectively buying shares at a discount to the market price.

Are these repurchase programs replacing any previous ones?

No, the $750 million ASR and the new 10 million share repurchase program are in addition to an existing 10 million share repurchase program authorized in February 2005. Approximately 3.5 million shares were still available under that older program at the time of this filing.

KLAC 8-K: Material Agreements & Regulation FD

Summary

KLA-Tencor Corporation (KLAC) announced on February 22, 2007, a significant capital allocation strategy through a $750 million accelerated share repurchase (ASR) agreement with Merrill Lynch International. This ASR program is designed to reduce the number of outstanding shares, which can signal management's confidence in the company's valuation and potentially enhance future earnings per share. The repurchase price will be based on a discount to the volume-weighted average price of the company's common stock over a specified period following the agreement's execution. In addition to the ASR, the company's Board of Directors also approved a new 10 million share repurchase program. This new program is additive to the existing 10 million share repurchase authorization, of which approximately 3.5 million shares remained available. These combined repurchase initiatives underscore KLA-Tencor's commitment to returning capital to shareholders and managing its equity structure.

Key Highlights

1KLA-Tencor entered into a $750 million accelerated share repurchase (ASR) agreement with Merrill Lynch International.
2The ASR is intended to reduce the number of outstanding shares of common stock.
3The repurchase price for the ASR will be determined by a discount to the volume-weighted average stock price during a post-execution period.
4A new 10 million share repurchase program has been approved by the Board of Directors.
5The new repurchase program is in addition to an existing program, of which approximately 3.5 million shares remained available.
6These repurchase actions signal management's confidence and a strategy to return capital to shareholders.

KLA CORP 8-K Report, Material Agreement (Feb 22, 2007)

Summary

Key Highlights

Frequently Asked Questions