Philips Electronics (NYSE:PHG) announced early Wednesday it plans to repurchase €5 billion ($7.2B) of common stock over the next two years, beginning Jan. 2. The company credited its repurchase decision to a Dutch tax law revision adopted late Tuesday, which increased the limit for tax-free share repurchases. Philips' CEO Gerard Kleisterlee called the buyback an "additional important step" in the company's capital re-allocation process. "Philips is well under way to achieve its goal of an efficient balance sheet before the end of 2009." Since 2005, Philips has bought back €5.2B of its shares and made €6.5B of acquisitions.
A Philips spokesman said the buyback is not related to a letter received from activist investor shareholders Jana Partners and D.E. Shaw Group, who own a combined 1.6% stake in the company. Philips said the shares from the forthcoming share repurchases will be subsequently cancelled. In addition, its existing share buyback program (€820M repurchased of €1.63B approved) will be terminated Wednesday. Analysts and investors alike reacted positively to the buyback news. Ordinary shares of Philips were last up 1.6% to €30.49 in early afternoon trading in Amsterdam. Philips' ADRs rose 2.1% to $43.20 on Tuesday. Philips is an 11% component of iShares MSCI Netherlands ETF (NYSEARCA:EWN).
Additional Reading: Philips Shares Up After Two Activists Join Forces • Philips Electronics Q3 2007 Earnings Call Transcript
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