Ford plans to spend $1.8 billion to repurchase 116 million shares of stock to offset share dilution.
Ford Motor Co. plans to spend $1.8 billion as part of a plan to buy back 116 million shares of stock. The repurchase plan is aimed at offsetting potential dilution of the stock.
“These actions are consistent with our overall capital strategy to take anti-dilutive actions and position ourselves to further reduce automotive debt,” said Bob Shanks, Ford’s chief financial officer, in a statement.
The combined share repurchases will reduce diluted shares by about 3%, the company said.
The automaker is looking to offset the affects of two actions looming on the horizon. First, the maker has 4.25% Senior Convertible Notes due Nov. 15, 2016. However, beginning this November, Ford can terminate the conversion rights of the noteholders, which gives them 30 days to convert the notes to shares of stock. The maker is repurchasing 103 million shares to tackle that issue.
Also, the company plans to purchase an additional 12.6 million shares to offset caused by share-based incentive employee compensation for 2014. Ford engaged in similar actions in 2012 and 2013 through open market stock buys.
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“The strength of our cash generation gives us confidence to take these actions to enhance shareholder returns,” Shanks said.
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Ford reported on April 25 that its automotive operating-related cash flow was $1.2 billion in the first quarter. The company ended the first quarter with automotive gross cash of $25.2 billion, exceeding debt by $9.5 billion, along with a strong automotive liquidity position of $36.6 billion, an increase of $400 million from year-end 2013.
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As of April 30, there were 3.88 billion shares of Ford common stock. There are also 70.8 million shares of Ford’s Class B stock, which are owned by members of the Ford family. Ford stock was up slightly to $15.61 in early trading this morning after closing Wednesday at $15.46.