Wal-Mart Stores Inc renewed plans to buy back as much as US$15 billion of its shares, potentially bolstering the Walton family’s control of the world’s largest retailer.
The buyback replaces a previous US$15 billion repurchase announced on June 4 last year, chief financial officer Charles Holley said on Friday at Wal-Mart’s 41st annual meeting. About 14,000 people attended the gathering in Fayetteville, Arkansas.
Repurchases have boosted the founding Walton family’s ownership from 38 percent in March 2003 to about 48 percent as of March, according to Deborah Weinswig, an analyst at Citigroup Inc. New York-based Weinswig estimates the family may gain a majority of shares by the end of next year.
Photo: Bloomberg
Ownership of more than 50 percent amounts to a “premium-free takeover of the company,” Charles Elson, director of the University of Delaware’s Center for Corporate Governance, said in an interview before the buyback was announced.
Since March 2003, when the Waltons owned about one-third of the retailer, the shares had gained 15 percent through May 31. That’s about one-fifth of the increase in the Standard & Poor’s 500 Consumer Staples Index. Wal-Mart acquired about US$13 billion in shares under the previous buyback program.
“Walmart’s share repurchase virtually guarantees that the Walton family will control over 50 percent of the common stock, possibly within a few months,” Per Olstad, acting legal counsel of CtW Investment Group, said in an e-mail. “This could be the last annual shareholder meeting where the company is required to meet the board independence requirements under the NYSE [New York Stock Exchange] listing standards.” Pension funds affiliated with union-backed CtW hold an about 7 million shares in Wal-Mart.
David Tovar, a spokesman for Wal-Mart, said the company has no plans to use NYSE exemptions. The exchange’s rules state that a “controlled” listed company can claim an exemption from having a majority of independent directors and from having fully independent nominating and compensation committees.
“Wal-Mart and the Walton family believe an independent board is an important part of our corporate governance,” Tovar said.
Wal-Mart shares rose US$0.11 to US$53.66 at 4:02pm in NYSE composite trading. The shares have fallen less than 1 percent this year.
The company was founded in 1962 when brothers Sam and Bud Walton opened the first store in Rogers, Arkansas. It was incorporated as Wal-Mart Stores Inc on Oct. 31, 1969 and shares were listed on the NYSE in 1972.
Wal-Mart’s “governance is sufficient,” Timothy Hoyle, vice president of research at Haverford Investments, which has US$6 billion under management including Wal-Mart shares, said in an interview. “If I am not happy with management or the board, I can sell.”
While profit growth has accelerated, Wal-Mart’s US comparable-store sales have fallen for eight straight quarters as shoppers grapple with rising grocery and gasoline prices and persistent unemployment. To stem the declines, chief executive Mike Duke and US chief Bill Simon have added thousands of products to the shelves and announced plans for smaller outlets.
Wal-Mart plans to open 15 Express stores, each about 1,394m2 feet in Arkansas, North Carolina and Chicago this year. The first Express store in Gentry, Arkansas, will open Wednesday and includes take-home meals such as US$5.98 pepperoni pizzas. Some Express stores will include a pharmacy and gasoline pumps. The Gentry store carries about 12,000 products, compared with an average of 142,000 at Wal-Mart’s supercenters.
The economy created 54,000 jobs last month and the jobless rate unexpectedly climbed to 9.1 percent, the highest level this year, from 9 percent a month earlier, the US Department of Labor said earlier yesterday.
Confidence among US consumers unexpectedly fell last month to a six-month low as Americans’ outlook for income growth and business hiring worsened, the Conference Board said on Tuesday. Slower than expected job and wage growth means consumer spending, which accounts for about 70 percent of the economy, may remain in check.
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