Cash Management

Caterpillar Leads Buyback Parade

New $7.5 billion stock-repurchase program represents more than 17 percent of its total market capitalization.
Stephen TaubFebruary 16, 2007

Despite a surge in the global stock markets, large, cash-rich companies continue to repurchase their shares.

In the week ending February 16, at least 22 companies announced share buybacks, according to an analysis by The previous week, 28 companies made such an announcement, according to

Caterpillar announced on Thursday that its board had approved a new $7.5 billion stock-repurchase program, representing more than 17 percent of its total market capitalization.

The buyback program is its fourth since 1995; during that 12-year period, the manufacturer of construction and mining equipment repurchased a total of $8.5 billion in shares. Caterpillar expects to complete its current stock-repurchase program, valued at $6.4 billion, within the next few months — “a year and a half ahead of schedule,” according to a statement by chairman and chief executive officer Jim Owens. This is “a testament to our strong cash flows and financial position,” he added.

Caterpillar expects to complete the new buyback program within the next five years.

Honeywell announced on Friday that it would repurchase up to an additional $3 billion of its common stock, or nearly 8 percent of its total market capitalization. Under previous programs, the industrial manufacturer repurchased about 98 million shares valued at $3.8 billion from the fourth quarter of 2003 through the end of 2006.

“Our share repurchase program, combined with three consecutive annual 10 percent increases in the dividend rate and a successful acquisition track record, demonstrate Honeywell’s commitment to deploying cash to build shareowner value,” said chairman and chief executive officer Dave Cote in a statement.

Earlier in the week, 3M announced a two-year, $7 billion share-repurchase authorization, the largest in the company’s history, representing 12.5 percent of its total market capitalization. “While our first priority remains investing for growth, returning cash to our shareholders remains an integral part of our strategy,” said chairman, president, and chief executive officer George W. Buckley in a statement.

Meanwhile, Asbury Automotive Group announced that it will repurchase 1.3 million shares, or about 10 percent of the total outstanding. Insiders control more than 57 percent of the auto retailer, which has a market capitalization of $872 million.

Other companies that announced buybacks in the past few days include Xerox, CSX, Avaya, Sterling Bancorp, and T. Rowe Price.

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