Cummins Inc. announced on Tuesday that it has entered into an accelerated share repurchase (ASR) agreement with Goldman, Sachs & Co. to repurchase $500 million of Cummins’ common stock. The move is part of Cummins’ previously announced share repurchase plans authorized by its board of directors.
Cummins will repurchase $500 million of its common stock from Goldman, Sachs & Co. with an initial delivery of about 4 million shares based on current market prices. The final number of shares to be repurchased will be based on Cummins’ volume-weighted average stock price during the term of the transaction, less a discount. The repurchase is expected to be completed by the end of the second quarter of this year.
“This $500 million ASR agreement reflects our view that the company’s shares are currently trading well below intrinsic value and is consistent with our plans to return 75 percent of operating cash flow to shareholders in 2016,” said Tom Linebarger, Cummins chairman and CEO.
Since Thursday when Cummins released its 2015 fourth quarter and year-end earnings statements, the company’s stock price has been trending higher. After closing at $90.66 on Wednesday, it closed at $97.57 on Thursday, $99 on Friday, $98.43 on Monday and $99.70 on Tuesday.
Analysts said the company ended the year better than expected.
Also Tuesday, Cummins’ board of directors declared a quarterly common stock cash dividend of 97.5 cents per share, payable March 1 to shareholders of record Feb. 19.