In an attempt to enhance shareholder return, Liberty Global Inc. (LBTYA - Analyst Report) , one of the largest triple play cable operators in the international market, has declared the authorization of a share repurchase program worth $1 billion. The company intends to spend the proceeds in different periods of 2013.
At the end of the third quarter of 2012, Liberty Global had $4,294.5 million of cash and marketable securities on its balance sheet. However, the company had $26,461.5 million of outstanding debt, which translates into higher interest payments, thereby reducing the bottom line and earnings per share. The share repurchase activity will not only fuel the company’s earnings per share but will also boost its share price.
Under the new $1-billion share buyback plan, the Englewood, Colorado-based company plans to buy back its different class of shares, which includes Series A, Series C or a combination of both type during 2013.
The stock repurchase program may be done through open market transaction or through privately-negotiated deals, which may include derivative transactions. Nevertheless, the share buyback timing will depend on market condition.
During 2012, Liberty Global repurchased shares worth $925 million, bringing the total amount of share brought to $9 billion since the commencement of the program in 2005. This reflects the company’s consistent effort to boost the return to its shareholders.
Though the company has declared weak third-quarter 2012 financial results, its losses narrowed considerably compared to prior-year quarter. Moreover, deployment of high-speed DOCSIS 3.0 network has facilitated the company to compete with Virgin Media Inc. and BT Group plc. (BT - Snapshot Report) , and has also led to an increase in revenue. We believe these factors along with a strong liquidity position have stimulated the buyback decision.
We maintain our long-term Neutral recommendation on Liberty Global. Currently, it has a Zacks #3 Rank, implying a short term Hold rating.