KAL-Tencor Announces Leveraged Recapitalization Plan
After announcing a leveraged recapitalization plan late Thursday, which includes a special $16.50 per share dividend, as well as an additional $250 million on its existing buyback, KLA-Tencor shares jumped 6.90%. This deal is equivalent to 23% of the company stock’s current value and a special dividend with an aggregate value of about $2.75 billion.
To show confidence in its business prospects, KLA-Tencor introduced the plan and explained its move. As part of the recapitalization, roughly $2.5 million in debt will be refinanced. Although stock jumped in Friday’s trading, the company’s credit rating was downgraded by Fitch to a BBB-.
Many analysts believe that by dramatically ramping up cash return to shareholders, competitors such as Lam Research and Teradyne will likely feel the pressure to reach deep into their own pockets, thereby returning some of their bounty as the industry becomes less cyclical.
Another reason for an increased share value of KLA-Tencor Corporation was reported first quarter results for fiscal 2015. At one time in Thursday’s extended trading, shares surged around 19% but then closed at $71 per share. However, in premarket trade on Friday, stock increased as much as 14% to $81.01 a share.
Reportedly, KLA-Tencor’s Board of Directors will declare but also pay the special cash dividend by the end of 2014, this in addition to the existing quarterly cash dividend paid to shareholders at $0.5 per share. Sometime next month, the regular cash dividend will be announced after the Board concludes its scheduled meeting.
KLA-Tencor’s special cash dividend will in part be financed by cash held by the company with the remainder coming from incremental debt added to the $2.5 billion current debt.
Another stock repurchase program was also approved by the company, which includes buying back 3.6 million shares of total common stock. This second program has an estimated value of $250 million, adding to the $1 billion in stock buyback announced by the company in July.
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