The Lemon Fool

Keeping them in 'treasury' means the company has the option to re issue them if it wants to but does not affect earnings per share etc. The number of shares used to divide into profits is the issued shares held by shareholders and it makes no difference whether those bought back are cancelled or in treasury.

Bouleversee wrote:Can someone explain how keeping the shares in treasury, as opposed to cancelling them, will enhance the value of existing shareholders' holdings. What is the object of this exercise? Do they think the shares are undervalued at present and plan to sell them when they go up or is this to increase the pool of shares to dish out in free or cut price options to personnel?

In almost all regards, putting shares in Treasury is the same as cancelling them. They no longer count towards the total of shares in issue and no longer receive dividends. Once in Treasury it's as if they didn't exist.

The 'enhanced value for existing shareholders' is the same, there are less shares to divide the dividend between, and each share in issue now represents a larger fraction of the company. The only difference is that it's cheaper for the company to take shares out of Treasury rather than issue new shares, should they be needed.

It doesn't seem to have done much for the s.p. so far.

No, share buybacks hardly ever do in my experience. But neither would it if the shares had been cancelled.

Dod101 wrote:

Retaining the share in treasury will not in itself do anything to enhance the share price. Buying back Euro3 billion ought to help the share price but maybe if anything all it has done is prevented a further drop in the price. I guess they may issue them towards the purchase price of a new acquisition but in the meantime just try to console yourself with the thought that it may have been a good time to buy in their shares. Unilever is it would seem out of favour at the moment.

Dod

Thanks for your input Dod. I agree regarding ULVR being out of favour currently. I intend topping up my holdings soon.

Ian.

Breelander wrote:

Bouleversee wrote:
It doesn't seem to have done much for the s.p. so far.

No, share buybacks hardly ever do in my experience. But neither would it if the shares had been cancelled.

How have you ever managed to witness the parallel exercise of not doing the buyback, and what was the difference in the value of the share price?

At best all you can say is the price hasn't appeared to have risen over the period of the exercise, but it might (and should) be lower without the buyback.

Breelander wrote:

It doesn't seem to have done much for the s.p. so far.

No, share buybacks hardly ever do in my experience. But neither would it if the shares had been cancelled.

As for share buybacks if they buy in enough shares it will certainly make a difference to the share price. You can see this with investment trusts such as Personal Assets where they successfully try to hold the share price at more or less NAV. In their case of course they are mostly doing the reverse and issuing new shares to try to suppress the premium but the principle is exactly the same.

The trouble for companies with a large market cap like Unilever and Shell is that their share buybacks are usually a small percentage of the total shares in issue and so it is difficult to see much positive effect in the share price.

Dod

Thanks to all. Somewhat reassuring. I hooe the disappointing performance improves.

Dod101 wrote:The trouble for companies with a large market cap like Unilever and Shell is that their share buybacks are usually a small percentage of the total shares in issue and so it is difficult to see much positive effect in the share price.

Yes, not quite as direct and in-ya-pocket as just giving the money to the company's owners. Also if one is trying to buy income then having an increased share price means just that at that moment it costs more to get that income. For me the benefits of share buybacks are just too indirect and vague to be appealing. C.

Is the dividend payable on the shares in treasury

Keith

keith wrote:Is the dividend payable on the shares in treasury

Keith

Presumably not if they are tantamount to being cancelled so that should add a little to the kitty.

keith wrote:Is the dividend payable on the shares in treasury

Keith

No.

https://en.m.wikipedia.org/wiki/Treasury_stock

Bouleversee wrote:

keith wrote:Is the dividend payable on the shares in treasury

Keith

Presumably not if they are tantamount to being cancelled so that should add a little to the kitty.

Dividends are not paid on shares held in treasury. That would just be the company paying itself from one pocket into another. And of course as you say it means that there fewer mouths to feed when it comes to paying the dividend which either saves the company money or can modestly increase the amount available to others.

Dod

csearle wrote:

Dod101 wrote:The trouble for companies with a large market cap like Unilever and Shell is that their share buybacks are usually a small percentage of the total shares in issue and so it is difficult to see much positive effect in the share price.

Yes, not quite as direct and in-ya-pocket as just giving the money to the company's owners.

And the taxman, often too, will take money via that direct dividend, that could otherwise be left with the owners if that return was via a buyback. I would rather control my "income" and tax events, not the directors of the companies I partially own.

One of Britain's best known investors has attacked Unilever for its "ludicrous" focus on sustainability, in a sign of growing City frustration at blue chip companies championing fashionable causes. Terry Smith, manager of the £29bn Fundsmith Equity fund, said that the consumer goods behemoth has become "obsessed" with its public image and mocked its efforts to imbue brands such as Hellman's mayonnaise with a higher purpose. Telegraph per ADVFN.

V8

88V8 wrote:One of Britain's best known investors has attacked Unilever for its "ludicrous" focus on sustainability, in a sign of growing City frustration at blue chip companies championing fashionable causes. Terry Smith, manager of the £29bn Fundsmith Equity fund, said that the consumer goods behemoth has become "obsessed" with its public image and mocked its efforts to imbue brands such as Hellman's mayonnaise with a higher purpose. Telegraph per ADVFN.

V8

What Smith said....( Fundsmith Annual Letter Jan 22 )

https://www.google.co.uk/url?sa=t&sourc ... zh0ml7cwuW

"Unilever seems to be labouring under the weight of a management which is obsessed with publicly displaying sustainability credentials
at the expense of focusing on the fundamentals of the business. The most obvious manifestation of this is the public spat it has become
embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank. However, we think there are far more ludicrous examples
which illustrate the problem. A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost
the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler
alert — salads and sandwiches). Although Unilever had by far the worst performance of our consumer staples stocks during the
pandemic we continue to hold the shares because we think that its strong brands and distribution will triumph in the end."

monabri wrote:

88V8 wrote:One of Britain's best known investors has attacked Unilever for its "ludicrous" focus on sustainability, in a sign of growing City frustration at blue chip companies championing fashionable causes. Terry Smith, manager of the £29bn Fundsmith Equity fund, said that the consumer goods behemoth has become "obsessed" with its public image and mocked its efforts to imbue brands such as Hellman's mayonnaise with a higher purpose. Telegraph per ADVFN.

V8

What Smith said....( Fundsmith Annual Letter Jan 22 )

https://www.google.co.uk/url?sa=t&sourc ... zh0ml7cwuW

"Unilever seems to be labouring under the weight of a management which is obsessed with publicly displaying sustainability credentials
at the expense of focusing on the fundamentals of the business. The most obvious manifestation of this is the public spat it has become
embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank. However, we think there are far more ludicrous examples
which illustrate the problem. A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost
the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler
alert — salads and sandwiches). Although Unilever had by far the worst performance of our consumer staples stocks during the
pandemic we continue to hold the shares because we think that its strong brands and distribution will triumph in the end."

Exactly. Why purport to be news when the source itself can be quoted

https://www.fundsmith.co.uk/media/3wcng ... olders.pdf

rather than a 3rd party website quote of a second hand source newspaper?

Whilst not ULVR specific others might be interested in the other views of the long term, and continuing, investor in this company.

To be fair to Unilever, the decision made by Ben and Jerry was made by the independent board of that company under arrangements enshrined in the takeover agreement between Unilever and them. Ben and Jerry are Jews so it is hard to accuse them of anti semitism.

https://www.nytimes.com/2021/07/28/opin ... srael.html

I'm not defending Unilever and I completely agree with Terry Smith's rant about Unilever focussing on ridiculous greenwash rather than on running the business in a sustainable and profitable manner.

dealtn wrote: Why purport to be news when the source itself can be quoted rather than a 3rd party website quote of a second hand source newspaper?

Fair point.
I assumed it was an interview.
I hold in my HYP, but am not overly inclined to add.

V8

LONDON, Jan 15 (Reuters) - Consumer goods giant Unilever (ULVR.L) said it had approached Glaxosmithkline (GSK.L) about buying the pharmaceutical group's consumer goods arm after a newspaper reported that a 50 billion pound ($68.4 billion) offer it made had been rebuffed.

"GSK Consumer Healthcare is a leader in the attractive consumer health space and would be a strong strategic fit as Unilever continues to re-shape its portfolio," Unilever said in a statement on Saturday.

"There can be no certainty that any agreement will be reached."

GSK did not immediately respond to a request for comment.

Earlier, Britain's Sunday Times said the Unilever bid for the business was worth roughly 50 billion pounds, and had been rejected as too low by GSK and Pfizer (PFE.N), which owns a minority stake in the division.

The approach by Unilever, which owns brands such as Dove soap and Marmite, for Glaxo’s portfolio of household brands including Panadol painkillers and Sensodyne toothpaste was understood to have been unsolicited, it added.

Unilever's bid did not include any takeover premium or recognition of synergies, the newspaper said. It was not clear whether Unilever would make a higher offer, it added.

see https://www.reuters.com/business/retail ... 022-01-15/

Matt

No doubt that GSK's consumer products business is an excellent bolt on fit for Unilever. Would it add value for shareholders? Far less doubtful. History is littered with deals that destroy rather than add value.

BullDog wrote:No doubt that GSK's consumer products business is an excellent bolt on fit for Unilever. Would it add value for shareholders? Far less doubtful. History is littered with deals that destroy rather than add value.

That's just what I was thinking.

RC