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 from a financial institution (in this case, Credit Suisse). The institution typically buys the shares in the open market and then resells them to the company. This allows the company to retire a significant number of shares quickly, often at a pre-determined price or based on a formula involving market prices over a period.

What is the total value of Northrop Grumman's stock repurchase program mentioned?

The company has a previously announced $1.5 billion stock repurchase program. This $750 million ASR agreement is a part of that larger program.

What is the financial implication of the ASR agreement for Northrop Grumman?

The ASR agreement represents a significant commitment of capital to repurchase shares, indicating management's confidence in the company's value and its strategy to return capital to shareholders. The company will acquire approximately 11.6 million shares, which could reduce the number of outstanding shares and potentially increase earnings per share (EPS).

How will the final price of the repurchased shares be determined?

While an initial purchase price is set at $64.78 per share, the ASR agreement includes a provision for a potential price adjustment. At the end of the ASR period, the company and Credit Suisse will determine a final price based on the volume-weighted average price of shares CSNY purchased. The company may receive a credit or be required to pay an additional amount in cash or stock, depending on this final price calculation.

NOC 8-K: Material Agreements

Summary

Northrop Grumman Corporation (NOC) announced on March 7, 2006, the execution of a $750 million Accelerated Share Repurchase (ASR) agreement with Credit Suisse. This ASR is part of the company's previously authorized $1.5 billion stock repurchase program and follows the completion of a prior $500 million share repurchase agreement. The ASR will involve the purchase of approximately 11.6 million shares of common stock at a fixed price of $64.78 per share.

Key Highlights

1Northrop Grumman entered into a $750 million Accelerated Share Repurchase (ASR) agreement on March 6, 2006.
2The ASR agreement is with Credit Suisse, New York Branch.
3Approximately 11,577,647 shares of common stock will be purchased under this ASR.
4The purchase price per share is fixed at $64.78.
5This ASR is a component of the company's larger $1.5 billion stock repurchase program.
6The ASR follows the recent settlement of a prior $500 million share repurchase agreement with the same counterparty.

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Material Agreement (Mar 7, 2006)

Summary

Key Highlights

Frequently Asked Questions