Jardine Matheson (JM) plans to part-finance a share buyback costing up to $908 million via a $550 million issue of bonds convertible into the Chase Manhattan shares it received as a result of Chase Manhattan's acquisition of Robert Fleming. The bonds, which have a maturiy of seven years and carry a coupon of 4.75%, can be exchanged for Chase Manhattan shares at a price of $63.16 - a 22.64% premium to Chase Manhattan's closing share price on 3 August. Investors can excercise the convertible one year after issue, though JM may decide whether to settle in cash or Chase shares.
In total, JM received cash and Chase Manhattan shares worth $960 million as a result of the takeover and this will more than cover the amount JM needs for the buyback. The buyback will raise JM's gearing to 24% from around 11%, so appeasing those shareholders that feel the company's finances have been too conservative in the past.
"We have sold Robert Fleming. We have talked to our shareholders. Our shareholders have said they would like us to invest the proceeds in the company and existing businesses," says JM Finance Director Norman Lyle. The finance director denied the move was designed to further entrench the existing cross-shareholding arrangement that exists between JM and subsidiary Jardine Strategic (JS). JM owns 66% of JS and JS owns 40% of JM going into the buyback.
The buyback will take the form of a tender, with shareholders invited to offer up to 100 million shares sale at prices in the range $4.80-$5.50. Subject to shareholder approval, the tender may be extended in respect of a further 65 million shares. Assuming 165 million shares are repurchased, JS' stake in JM would rise to 48%.
