Ski-Doo parent company BRP Inc. announced this week plans for an aggressive buy-back of some of its stock totaling as much as $350 million (in Canadian dollars, which is about $288 million in U.S. dollars).
The move, authorized by the BRP Board of Directors, would result in the company re-acquiring shares of its stock from shareholders at a pre-set price between $94 and $113 per share.
We’re snowmobilers, not financial gurus, so we’ll leave the big analysis for the financial outlets. In general terms, though, typically such buy-back moves by big corporations tend to happen when a company has excess cash on hand and (a) doesn’t see any appealing outside investment opportunities and/or (b) feels that its stock is trading at a rate that is below its proper market value.
The opportunity for investors is that (a) those who want to cash out part of their investment have an easy and likely profitable way at this point, and (b) those who stay in will likely see larger dividends on equal earnings in the future because the earnings disbursements are spread out among fewer shares – so there are more dollars per share.
The move didn’t seem to move BRP stock price much. There was an immediate burst in its price on the morning of the announcement (June 15): The stock jumped from roughly $93 to $98 per share on the Toronto exchange. But the stock then settled in and as of this writing midday on June 16, it was selling for $96 per share.
The company initiated a similar buy-back in 2017 and currently has more than 40 million outstanding shares.
Aside from Ski-Doo, BRP also operates the Lynx, Sea-Doo, Rotax, Can-Am, Manitou and Alumacraft brands, and starting winding-down Evinrude last year.
Here’s the full press release from BRP.
BRP Announces $350,000,000 Substantial Issuer Bid
June 15, 2021 at 7:30 AM EDT
Valcourt, Quebec, June 15, 2021 – BRP Inc. (TSX:DOO; NASDAQ:DOOO) today announced that the Board of Directors has authorized the launch of a substantial issuer bid (the “Offer“) pursuant to which BRP will offer to purchase for cancellation up to $350 million of its subordinate voting shares (the “Shares“). All dollar amounts are in Canadian dollars.
Subject to obtaining the necessary exemptive relief under applicable securities laws in the United States and Canada, the Offer will proceed by way of a combination of a “modified Dutch auction” and a proportionate tender. Holders of Shares and multiple voting shares wishing to tender to the Offer will be entitled to do so pursuant to: (i) auction tenders in which they will specify the number of Shares being tendered at a price of not less than $94.00 and not more than $113.00 per Share in increments of $0.25 per Share, (ii) purchase price tenders in which they will not specify a price per Share, but will rather agree to have a specified number of Shares purchased at the purchase price to be determined by auction tenders, or (iii) proportionate tenders in which they will agree to sell, at the purchase price to be determined by auction tenders, a number of Shares that will result in them maintaining their proportionate equity ownership in BRP following completion of the Offer. Shareholders who validly deposit Shares or multiple voting shares without specifying the method in which they are tendering such shares will be deemed to have made a purchase price tender.
Holders of multiple voting shares will be entitled to participate in the Offer. Multiple voting shares taken up by BRP will be converted into Shares on a one-for-one basis immediately prior to take up. Beaudier Inc. and 4338618 Canada Inc., which collectively hold approximately 27.7% of BRP’s issued and outstanding Shares and multiple voting shares, have advised BRP that they will make proportionate tenders in connection with the Offer in order to maintain their proportionate equity ownership in BRP following completion of the Offer.
As of close of business yesterday, BRP had 40,100,015 Shares and 43,891,671 multiple voting shares issued and outstanding.
The purchase price to be paid by BRP for each validly deposited Share will be determined upon expiry of the Offer and will be based on the number of Shares validly deposited pursuant to auction tenders and purchase price tenders, and the prices specified by shareholders making auction tenders. As a result, BRP’s shareholders who tender their Shares (other than Beaudier Inc. and 4338618 Canada Inc. and shareholders who make a Proportionate Tender) will set the purchase price for the Offer. The purchase price will be the lowest price (which will not be more than $113.00 per Share and not less than $94.00 per Share) which enables BRP to purchase Shares up to the maximum amount available for auction tenders and purchase price tenders, determined in accordance with the terms of the Offer. Shares deposited at or below the purchase price as finally determined by BRP will be purchased at such purchase price. Shares that will not be taken up in connection with the Offer, including Shares deposited pursuant to auction tenders at prices above the purchase price, will be returned to the shareholders.