What is an Accelerated Share Repurchase (ASR) agreement?

An Accelerated Share Repurchase (ASR) agreement is a contract where a company buys back its own stock from a financial institution, often at a discount, with the intention of immediately reducing the number of outstanding shares. The final cost or number of shares exchanged can be adjusted based on the average market price of the stock over a specified period.

Why is ONEOK repurchasing its shares?

ONEOK is repurchasing its shares as part of its previously announced stock repurchase program. This action is typically undertaken to return value to shareholders, potentially increase earnings per share (EPS) by reducing the share count, and signal confidence in the company's valuation.

How will the share repurchase affect ONEOK's financial position?

The repurchase will reduce the company's cash on hand by $281.4 million. However, it will also decrease the number of outstanding shares, which can positively impact earnings per share. The potential for market price adjustments means the final impact on cash or share count could vary.

What happens if the stock price moves significantly during the ASR term?

The ASR agreement includes a market price adjustment provision. If the volume-weighted average market trading price of ONEOK's common stock during the term of the ASR, less a discount, results in a higher effective price per share than the initial $37.52, ONEOK may be obligated to make an adjustment payment to UBS. This payment can be made in cash or in additional shares of ONEOK's common stock.

OKE 8-K: Material Agreements

Summary

ONEOK Inc. (OKE) announced on August 10, 2006, the execution of an Accelerated Share Repurchase (ASR) agreement with UBS AG, London Branch. This agreement involves the purchase of 7,500,000 shares of OKE's common stock for approximately $281.4 million, funded by existing cash reserves. The repurchase is expected to reduce the number of outstanding shares, impacting earnings per share calculations. The ASR is subject to market price adjustments based on the volume-weighted average trading price of OKE's stock during the agreement's term. ONEOK has the option to settle any potential adjustment payments in either cash or additional shares. This strategic move aligns with the company's previously announced stock repurchase program, signaling a commitment to returning value to shareholders.

Key Highlights

1ONEOK entered into an Accelerated Share Repurchase (ASR) agreement on August 7, 2006.
2The company will repurchase 7,500,000 shares of its common stock from UBS AG for $281.4 million.
3The share repurchase will be funded using the company's existing cash on hand.
4The transaction is expected to reduce the number of outstanding shares to approximately 110 million, effective August 10, 2006.
5The ASR includes a market price adjustment provision based on the stock's volume-weighted average trading price.
6ONEOK may settle any adjustment payments in cash or additional shares of common stock.
7This ASR is part of ONEOK's previously announced stock repurchase program.

ONEOK INC /NEW/ 8-K Report, Material Agreement (Aug 10, 2006)

Summary

Key Highlights

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