Telstra Corporation has completed its $1 billion off-market share buyback at the low end of its target price range. The telco giant said Monday it would buy back 238.23 million shares at $4.20 a share, representing 3.71 percent of its stock not owned by the Commonwealth government.
The buyback was more than two and a half times oversubscribed at $4.20, Telstra said, requiring the larger tenders to be scaled back by about 65.6 percent.
Chief financial officer John Stanhope said strong support for the buyback had led to the buyback price being struck at the bottom of the original tender range, flagged at between $4.20 and $5.40 per share when Telstra first announced the buyback in October.
Shareholders who bought shares at $7.40 in 1999, when the government completed its second tranche of 16.9 percent, will be able to claim a tax deduction on a large capital loss of $5.90 a share.
The move comes as Telstra has been caught in problematic investments in Asia, particularly the Reach undersea cable joint venture in Hong Kong which saw a $965 million write-down this year. Telstra has also had two years of falling profits. Stanhope said Telstra will continue to invest capital in expanding the business through growth or acquisitions.
"Come next financial year, we'll take another look at our situation and if there is nothing else to do with the money, we will return it to our shareholders," Stanhope said.
"The buyback was part of Telstra's ongoing capital management program and reflected Telstra's very sound financial settings,” he said. “The buyback does not impact the company's ability to maintain foreseeable capital investment, undertake appropriate acquisitions or fund other growth initiatives.” The $4.20 buyback price will comprise a fully franked dividend of $2.70 and a capital component of $1.50 per share bought back, Telstra said in a statement.
The government, which has not participated in the buyback, will up its holding to 51 per cent from 50.1 per cent.
The first 400 shares successfully tendered by each registered shareholder will be bought back in full before the scale back applies, as described in the buyback documents, Telstra said.
The scale back will not apply where this would leave shareholders who tendered all their shares with a remaining holding of 400 shares or less.
Shareholders with 1,009 or less Telstra shares who tendered all their shares into the buyback at $4.20 or as final price tenders will have all their shares bought back in full.
As a result of the buyback, the number of shareholders will reduce from approximately 1.845 million to 1.815 million.