Yahoo! Inc. (NASDAQ:YHOO) enhanced its stock-buyback plan by $5 billion and selling $1 billion in convertible notes to buyback additional shares.
The $1 billion convertible debt maturing in 2018 will take place privately and the notes will be due in 2018.
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Details of convertible note program
The initial purchasers of the convertible notes will have the right to purchase up to an additional $150 million aggregate principal amount of notes, exercisable within a 30-day period, solely to cover over-allotments. The notes will be convertible into cash, shares of Yahoo! Inc. (NASDAQ:YHOO)’s common stock or a combination of cash and shares of common stock, at Yahoo’s election. The interest rate, initial conversion rate and other terms of the notes will be determined at the time of pricing of the offering.
The Sunnyvale, California-based company may use up to $200 million of the net proceeds from this offering to repurchase shares of its common stock from purchasers of notes in the offering in privately negotiated transactions effected through one of the initial purchasers or its affiliate as Yahoo’s agent.
Buyback will increase value of remaining shares
A share buyback might be just the thing for cash rich Yahoo! Inc. (NASDAQ:YHOO) to pacify investors as it heads into a period of difficult growth. Yahoo earnings may be depressed for several quarters to come because of the revenue push. The company may need something to keep investors excited about the company.
According to Charlie Osborne of zdnet.com, the stock buyback program can help Yahoo to enhance the value of its remaining shares. Yahoo spent $3.1 billion buying back 123 million shares this year. The repurchase boosted Yahoo’s shares by over 70% this year, which enabled the Internet giant in the race to stay competitive with other giants including Google.
Yahoo! Inc. (NASDAQ:YHOO)’s chief executive officer Marissa Mayer’s turnaround has focused on acquisitions of smaller technology companies that can add to the company’s talent pool or reach new sets of users. During yesterday’s Salesforce.com Inc’s Dreamforce conference, she announced her plans to hire a head of design as she believes like other companies, Yahoo has to reinvent itself and should not design for the expert user.
Earlier, Yahoo! Inc. (NASDAQ:YHOO) sold a part of its stake in Chinese e-commerce giant Alibaba to raise the funds necessary to buy back shares.