The Woolworths Group Ltd (ASX: WOW) share price dropped lower on Monday despite the release of an update on its off-market share buyback.
The conglomerate's shares finished the day 1.2% lower at $32.30.
What happened with the share buyback?
On Monday Woolworths revealed that it has successfully completed its $1.7 billion off-market buyback.
According to the release, the company bought back a total of 58.7 million shares, which equated to 4.46% of its issued capital.
Woolworths paid a price of $28.94 per share, which was a discount of approximately 14%. This buyback price comprised a $4.79 capital component and a $24.15 dividend component.
Demand was very strong for the buyback, leading to an 84.68% scale back of offers being required. This was structured to minimise disadvantaging shareholders with small holdings.
Subject to exclusions due to any minimum price conditions, eligible shareholders who offered their shares at a 14% discount and/or as a final price offer had a priority allocation of 180 shares bought back before the scale back was applied.
Woolworths chairman, Gordon Cairns, was pleased with the outcome of the buyback.
He said: "We are pleased with the outcome and the strong level of investor interest. Completion of the off-market buy-back fulfils the Board's commitment to return the proceeds from the Woolworths Petrol sale to shareholders. Following the Buy-Back, the Woolworths Group balance sheet will remain strong and allow sufficient flexibility for future growth as the Board remains focused on long term shareholder value creation."
What are the tax implications?
The release explains that the ATO class ruling is expected to confirm that the $24.15 dividend component of the buyback price "will be treated as a fully franked dividend for Australian tax purposes only and that, for Australian capital gains tax purposes, the deemed capital proceeds will be A$7.50."
The ATO has advised that they intend to issue their class ruling in relation to the buyback by the end of June.
Payments via direct credit for shares bought back under the buyback will commence from Thursday May 30.
