Dallas-based Affiliated Computer Services (ACS) has decided to buy back nearly half of its outstanding shares after failing to reach an agreement to be acquired by an investment group. The announcement, according to the company, was one of the options it had considered in addition to the failed buyout.
The authorization allows the company to buy back up to 55.5 million shares of class A common stock, which represents approximately 45 percent of ACS’ outstanding shares. The offer is for stockholders to sell at $56 to $63 a share. ACS will pay the lowest price that enables it to purchase the 55.5 million shares. The transaction is referred by ACS as a “Dutch action” buy back.
In addition, Aetna just renewed its contract with ACS for BPO services. The insurance company signed at the end of January a $56 million, 3.5-year renewal for services including including document preparation, imaging, storage, management, and retrieval for medical, dental, disability, and other claims. It was just another positive development for a company peppered with good news in the same week, which also included reporting record sales during the quarter. The announced buyback pushed its share price to all-time highs.
“The tender offer we announced today is consistent with our confidence in the long-term future of ACS and our commitment to enhancing shareholder value,” said Darwin Deason, ACS’ founder and chairman of the Board. “This tender offer represents an opportunity for the company to deliver value to those shareholders who elect to tender their shares, while at the same time increasing the proportional ownership of non-tendering shareholders in ACS. We believe the company possesses the necessary financial strength to successfully complete the tender offer and the related borrowings without impacting our ability to grow and deliver services to our clients.”
He added that the company after ending talks with the strategic plan, its use of cash flows from operations for, among other things, capital expenditures, acquisitions, debt repayment, dividends and share repurchases, and a variety of alternatives for using the company’s available resources.
The company had been in talks to be acquired by a group led by Texas Pacific Group of Fort Worth, TX. However, the two sides failed to reach an agreement in January, leading to the buyback announcement.