DSM: EUR 750 million Share buy-back and Loyalty Dividend
DSM strategy Vision 2010 - Building on Strengths: well on track
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Vision 2010 described the parameters regarding DSM's balance sheet strategy. As a main building block to realize the desired balance sheet structure DSM has decided to launch a share buy-back program with a total value of EUR 750 million. Such a program shall increase DSM's gearing (net debt/ total capital) by approximately 10 percentage points, taking it to a level of around 20%. It will enable the repurchase of approximately 20 to 25 million ordinary shares, (assuming a share price in between EUR 30 and EUR 35), which equals approximately 10 to 13% of the total number of ordinary shares in issue. Consequently, the direct EPS enhancing effect for ordinary shareholders will be around 10%.
For tax reasons, the execution of this share buy-back program will be split over 2006 and 2007. The first phase of this share buy-back program will start on 28 September, 2006 and will run until 31 December, 2006. DSM has signed a Discretionary Management Agreement with the bank that will execute this year's share buy-backs. The number of shares to be repurchased in this first phase will not exceed 6.7 million shares. The program will be completed in 2007. The repurchase price will be based on the daily VWAP (Value Weighted Average Price). Daily volumes to be repurchased will be around 10% of the daily trade volume. In accordance with the present regulations DSM will regularly inform the market via press releases about the progress made in the execution of this share buy-back program.
In order to further strengthen communication with long-term shareholders DSM is considering a novel instrument: a Loyalty Dividend bonus for shareholders who have their DSM holdings registered. In this way DSM intends to reward long-term shareholders. At the same time it enables DSM to intensify communication with these shareholders. Shares held by the same shareholder in excess of a 3-year period will be entitled to a 30% Loyalty Dividend bonus over the average dividend in the preceding 3-year period and 10% per year thereafter. This novel instrument will be discussed with the shareholders in the coming months and depending on their reactions DSM may formulate proposals on the implementation of this instrument for the Annual General Meeting of March 2007.
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