Recently, Dana Holding Corporation (DAN) announced an accelerated share repurchase agreement (ASR) with JPMorgan Chase Bank, National Association, a wholly-owned subsidiary of JPMorgan Chase & Co. (JPM). Under the agreement, Dana will repurchase $200 million of its outstanding shares from the bank in multiple batches.
The first batch comprising 7.3 million shares will be purchased at the commencement of the ASR. The remaining shares are expected to be bought back by the end of 2013. The total number of shares to be repurchased under the ASR depends on the purchase price, which will be calculated using the share price of the averaging period as defined in the ASR agreement.
An ASR is usually used by companies to increase the pace of share buyback. The agreement is an indirect way of buying back shares from the open market. Although this results in a higher price for Dana, the risk associated with the buyback will be borne by JPM.
Following the repurchase of the initial 7.3 million shares, Dana’s total repurchased shares under its current $1 billion share buyback program will amount to 34 million for a purchase consideration of $775 million.
Dana increased the outstanding balance under its share buyback program to $1 billion in Jun 2013. The company’s strong liquidity position supported this increase.
Maumee, Ohio-based Dana is one of the world’s leading suppliers of driveline, sealing, and thermal technologies, which improves the efficiency and performance of passenger, commercial and highway vehicles. Dana currently carries a Zacks Rank #2 (Buy).
Some other stocks worth considering in the auto and truck industry are American Axle & Manufacturing Holdings Inc. (AXL) and Denso Corp. (DNZOY). Both these companies carry a Zacks Rank #1 (Strong Buy).
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