Capital Markets

Big Buybacks Back in Vogue

Motorola; Citigroup; Merrill Lynch; Liz Claiborne; First American.
Stephen TaubMay 23, 2005

Motorola Inc. announced that its board of directors has authorized the company to repurchase up to $4 billion worth of its shares over the next 36 months, or about 10 percent of its total market capitalization. This is the first buyback in the company’s history.

“Motorola is committed to investing for growth and creating value for our stockholders,” said chairman and chief executive officer Ed Zander. “We believe this stock repurchase program creates value for stockholders and further underscores our confidence in Motorola’s long-term growth. Our strong balance sheet and significant free cash flow allow us the flexibility to simultaneously invest in our current business, pay dividends, further reduce debt, initiate a share repurchase program and take advantage of strategic opportunities.”

Motorola’s stock is trading at around $17, two-thirds off its all-time high of about $51 in March 2000.

Meanwhile, Citigroup Inc. announced that it will repurchase $15 billion of its stock and that it raised its dividend 25 percent; Merrill Lynch & Co. said it is buying back $4 billion of its stock. The reason, say observers, is that these two companies are flush with cash.

“Directors have to reinvest money in the business, buy other companies, buy their own stock back, or give it to shareholders in the form of dividends,” Hugh Johnson, chief investment officer at Johnson Illington, told Reuters.

Other companies that recently announced buybacks:

• Liz Claiborne Inc. increased its buyback program by $250 million. The company had roughly $6 million remaining on its prior authorization.

• The First American Corp. announced that it would double its buyback plan to $200 million. To date, the company has purchased $63.9 million under the plan.