8-KOther EventsExhibits & Filings

MARSH & MCLENNAN COMPANIES, INC. 8-K Report, Corporate Update (Aug 28, 2007)

Filed August 28, 2007For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MMC) announced on August 24, 2007, its entry into an Accelerated Share Repurchase (ASR) agreement for $800 million. Under this agreement, MMC has already paid the full purchase price and received an initial delivery of 21,320,530 shares of its common stock. This initial delivery represents the minimum number of shares guaranteed, based on a 'price cap' provision within the agreement. Further adjustments to the share count are possible. If the average share price over a defined period falls below the cap price, the seller is obligated to deliver additional shares to MMC. The company anticipates that any such additional shares will be delivered by the first quarter of 2008. This ASR transaction indicates a significant capital return to shareholders and a belief by management in the undervaluation of the company's stock.

Key Highlights

  • 1Marsh & McLennan Companies (MMC) entered into an Accelerated Share Repurchase (ASR) agreement worth $800 million.
  • 2The company has paid the full $800 million purchase price for the ASR.
  • 3MMC has received an initial delivery of 21,320,530 shares of its common stock.
  • 4The initial share delivery is based on a contractual 'price cap' and represents the minimum number of shares to be repurchased.
  • 5The ASR agreement includes a provision for the seller to deliver additional shares if the average share price falls below the cap price.
  • 6Additional shares, if any, are expected to be delivered by the first quarter of 2008.
  • 7The transaction signals a significant commitment by MMC to return capital to shareholders and potentially boost the stock price.

Frequently Asked Questions

An Accelerated Share Repurchase (ASR) agreement is a transaction where a company buys back its own stock from a financial institution. The company typically pays the full amount upfront and receives an initial delivery of shares. The final number of shares repurchased may be adjusted later based on the company's stock price performance over a specified period, potentially resulting in additional shares being delivered to the company or returned to the seller.

While the filing doesn't explicitly state the reason, companies typically engage in share repurchases when they believe their stock is undervalued, to return excess cash to shareholders, or to offset the dilutive effects of stock options. The ASR indicates management's confidence in the company's stock and its commitment to enhancing shareholder value.

The 'price cap' is a contractual term within the ASR agreement. The initial delivery of shares is based on this cap, representing the minimum number of shares MMC will receive. If the average trading price of MMC's common stock during the calculation period is lower than this cap price, the seller is obligated to deliver additional shares to MMC, increasing the total number of shares repurchased. Conversely, if the average price is above the cap, MMC will have repurchased the minimum number of shares.

MMC expects that any required additional shares will be delivered by the seller by the first quarter of 2008. This means the final determination of the total number of shares repurchased, and thus the effective repurchase price per share, will be known around that time.