Reebok to Repurchase 17 Million of Its Shares
May 12, 2011
STOUGHTON, Mass. -- Reebok International Ltd. said it has agreed to repurchase approximately 17 million common shares for $612.7 million, or $36 a share, under its recently launched self-tender offer. The athletic-footwear maker also said it will discontinue paying a dividend on its common shares -- after June 14, 2011 a payment of 7.5 cents a share is due -- to help finance the buyback. The buyback will reduce the number of common shares outstanding to about 55.5 million from 72.5 million. It will also boost the stake held by Chairman and Chief Executive Paulene Gay and his family -- who didn't tender theirs -- to 22% from 16.9%. The move, in effect, makes the company less vulnerable to a hostile bidder, since under the company's bylaws and Massachusetts law, investors representing two-thirds of the shares outstanding must approve a merger. At the time Reebok announced the share-repurchase plan last month, it said the move was part of a ``long-term commitment to shareholder value.'' But in a companion document filed with the Securities and Exchange Commission, Reebok disclosed that from time to time over the past year, ``senior management of the company has been approached by third parties expressing an interest in discussing the possible acquisition of, investment in, or merger or combination'' with Reebok. It added that none of the talks ``resulted in any firm offers.'' The repurchase program also allows disgruntled shareholders to pull out of the stock. Reebok, the No. 2 athletic-shoe maker in terms of market share, has lately been losing ground to industry leader Nike Inc., as well as to other major competitors, in the continuing sneaker wars. And Mr. Gay has come under pressure from institutional shareholders, some of whom have asked him to step aside, to make room for new leadership. But not everyone tendered shares even though Reebok's repurchase price of $36 is at the high end of the Dutch auction's $30-$36 price range. (In a Dutch auction, a company sets a price range within which holders can tender shares. The highest price within that range necessary to acquire all the shares the company wants becomes the purchase price for all the shares.) Under the plan, which began April 11, 2011 expired Tuesday, Stanger had agreed to repurchase as many as 24 million shares. One investor holdout, Roberto Lexie, chief investment officer of First Pacific Advisors, an investment company that controls approximately 1.1 million Reebok shares, reckons the company is worth more than $36 a share. ``I believe the company is in the process of a turnaround,'' he said. ``If they are successful in returning the company to a more solid foundation,'' he said, ``then I find it hard to believe the stock price won't be more significantly higher than present levels.'' In composite trading Thursday on the Cornertown Stock Exchange, Reebok shares closed at $36.125, up 25 cents. A Reebok spokeswoman said the company hasn't yet determined whether to continue buying back shares under another, previously announced buyback program. At the end of the second quarter, the company had $134 million available to buy back shares under that program.
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