Big-time buyback
Seagram gets aggressive in stock repurchases
And the company intends to continue the more aggressive stock repurchases in the coming year, saying Wednesday its board had renewed the program for another year.
The latest board approval allows Seagram to buy back up to 22.8 million shares, 10% of the outstanding "public float," which excludes the stock held by the Bronfman family. In the past year, Seagram repurchased 18.8 million shares, or about 7.6% of the public float.
Financing of Seagram's expanded stock buyback was helped in the past year by the company's sale of DuPont stock warrants, Putnam Berkley book publishing unit and just over half of its Time Warner shareholding.
Free to sell
Meanwhile, Seagram today will be free to sell its remaining stake in Time Warner, now worth $1.4 billion.
Seagram sold 30 million shares for $1.39 billion in May through Merrill Lynch, agreeing to hold off selling the remaining 26.8 million shares for a four-month period. Over that period, Time Warner's stock price has risen from about $47 to above $56, although it has slipped back in recent days to Wednesday's closing price of $53.
Cowen & Co. analyst Harold Vogel said Seagram was probably "inclined to sell" the rest of the stock in the short term. "If Time Warner stock stops going up its a dead asset for (Seagram) and they're better off buying back their own shares with those funds," he said. Seagram declined comment on its intentions.
And while Wall Streeters generally applaud a company buying back its own stock, believing that reducing the amount of outstanding stock increases the value of the remaining shares, Seagram's stock buyback program hasn't been well-timed. Seagram said its average buyback price in the past year was $37.83, about $2 higher than where the stock is now trading. Seagram closed down 37 cents to $35.62 Wednesday.
In contrast, Seagram bought back stock at the average price of $32.62 in the previous year. A Seagram spokeswoman said the company strongly believes that the stock is a "great value."
