German utility E.ON has started a previously announced share buyback program to enhance its capital structure. The company hopes to buy back stock worth approximately E7 billion by the end of 2008, half of which will be purchased in 2007.
Based on the share price on June 26, 2007, this will allow the purchasing of some 58 million shares. This could possibly differ, depending on the development of the share price. The shares will initially be bought on the stock exchange.
E.ON said that, for these purchases, the price per share must not be more than 10% higher and not more than 20% lower than the average Xetra closing price of the previous three trading days. The share buyback will be carried out by one or more banks.
The buyback of the shares may subsequently also be carried out using derivatives, i.e. put options, as well as call options, or a combination of both. E.ON said that its board of management may suspend and resume the buyback program at any time.
E.ON CFO Marcus Schenck said: The launch of the program marks the start of our previously announced optimization of E.ON’s capital structure. The buyback reduces E.ON’s equity capital while increasing the company’s indebtedness. At the same time it will make E.ON shares more attractive because of its positive impact on the earnings per share and the dividend yield. The buyback also reflects our confidence in the valuation upside of our stock.