Ford Motor Co. has disclosed a $1.8-billion stock repurchase program that covers up to 116 million shares to offset possible share dilution and to position the company to cut its automotive debt by $883 million At the of the first quarter of 2014, Ford had around $15.7 billion in automotive debt. It has disclosed plans cut the figure to around $10 billion by mid-decade.
A repurchase of 103 million shares will counter dilutive effect of potential conversions of Ford’s 4.25 percent senior convertible notes that are due November 15, 2016. With the closing stock price of $15.46 per share on May 7, 2014, those 103 million shares would have a value of around $1.6 billion.
Another repurchase of 12.6 million shares will offset the dilutive effect of share-based incentive pay for around 26,000 salaried employees for 2014 – amounting to almost $195 million at Wednesday's closing stock price.
Ford CFO Bob Shanks remarked that two repurchase moves will reduce the carmaker’s diluted shares by around 3 percent.
Ford can terminate the noteholders' conversion rights starting November 20, 2014, and the carmaker has the right to settle conversions with shares, cash or both. The repurchase program will also offset dilutive effect of shares Ford will issue to settle those conversions.