Conglomerate GraceKennedy will be proceeding to buy back 2.5 per cent of the company's shares in issue towards the end of October although the transaction will extend over a period of up to one year.
The decision to proceed followed confirmation from the Ministry of Finance of a waiver applicable to tax which would have been otherwise payable on the repurchase of shares by the company, GraceKennedy said in a statement yesterday.
GraceKennedy said it notified the Jamaica and Trinidad stock exchanges about the transaction last Friday and indicated that the buy-back will commence 21 days after the notification.
The company disclosed that the repurchase of the shares will be conducted on the open market through the company's stockbrokers in Jamaica and Trinidad and Tobago. The company's cash flows will be the source of funds for the repurchase.
GraceKennedy said it will not be setting a fixed price for the share repurchase. The price for the acquisition will be the market price at the times of the repurchase. The company said it also reserves the right to decline any offer above the ceiling that the company may, from time to time, determine in its sole discretion.
In keeping with the requirements of the Companies Act of Jamaica, within 30 days of the dates of the repurchase of shares, GraceKennedy will advise its stockholders of the number of shares purchased, names of stockholders from whom they were purchased, and the price paid.
GraceKennedy's Group Chief Executive Officer Don Wehby indicated that the proposed repurchase may be implemented at such times over the period of one year when the share price is deemed to be below its true value and an opportunity exists to enhance shareholder value.
Utilise excess liquidity
"The share repurchase will serve to utilise excess liquidity in the company and raise earnings per share," the statement said. "It is intended that the first phase of the buy-back will commence in October 2013."
Wehby said further that "the GraceKennedy board believes that investing in our own company is an effective use of capital, as we see this as a good investment for long term returns".
The move will result in the buy-back of 8.38 million shares. GraceKennedy believes the shares are undervalued and the buy-back would boost company and investor returns.
The stock traded at $55.75 on the Jamaica Stock Exchange yesterday.