Assured Guaranty Ltd. (AGO) will buy back 5 million shares from WL Ross & Co. LLC and its affiliates (together known as WLR) for $21.94 per share.
The purchase price translates to a discount of 3% on Friday’s closing price of $22.62.
The transaction will culminate on Jun 5. Thereafter, WLR will have 8% stake in Assured Guaranty. Its holding will be about 14.9 million shares or $336 million.
This buyback is a part of Assured Guaranty’s earlier announced share repurchase program. With this buyback, the company will be left with $71 million to be repurchased under its authorization.
Last month, the board of directors of Assured Guaranty approved a repurchased program, whereby the company can buyback up to an additional $115 million shares. Meanwhile, in the first quarter of 2013, the company spent approximately $38.9 million to buy back 1.9 million shares.
Additionally, through May 6, the company spent $113.6 million to buyback 5.6 million shares. With the new approval, the company’s share repurchases authorization in 2013 totals $315 million.
Share repurchases benefit the company’s earnings per share, book value as well as shareholder equity, as shares outstanding reduce. Share buybacks enhanced Assured Guaranty’s adjusted book value by 27 cents, operating shareholder equity by 11 cents and reported book value by 4 cents in the last reported quarter.
Besides share repurchases, Assured Guaranty hikes its dividend to share more profit with shareholders. On Feb 7, 2013, the board of directors approved an 11% hike in its quarterly dividend taking the amount to 10 cents per share from 9 cents paid earlier. This approval marked the second dividend increase over the last 12 months.
Assured Guaranty carries a Zacks Rank #1 (Strong Buy). Multi-line insurers Eastern Insurance Holdings, Inc. (EIHI), Kemper Corporation (KMPR) and Old Republic International Corporation (ORI), among others, also share the same Zacks Rank.
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