Smiths City takes aim at share price
Furniture and appliance retailer Smiths City Group has set up a share buyback scheme to help shore up its share price.
The price has fallen from 75 cents a share a year ago to 58c after the company shelved a special payout to shareholders and reported soft pre-Christmas trade.
The buyback may be a defensive move against a cheap takeover by two investment companies associated with Sir Ron Brierley that have a 19.9 per cent stake in Smiths City.
Hamilton Hindin Greene investment adviser Grant Davies said the company would need to take care it did not reduce the number of shares on issue to the extent it would lift the Brierley group’s percentage and trigger the New Zealand Exchange’s 20 per cent compulsory takeover rule.
Davies said the shares in Smiths were not heavily traded, which meant the price could be easily affected if a few people sold at low prices.
The buyback arrangement would be restricted to 5 per cent of the company’s shares, Smiths City chairman Craig Boyce said in a statement to the NZX.
‘‘Directors have agreed to a limited programme of tactical buybacks aimed at overcoming the short-term share price distortions caused by low-volume trades in the company’s shares,’’ he said.
The programme would be managed to ensure that Smiths City’s major shareholders did not inadvertently breach the takeovers code threshold, he said.
The actual number of shares that would be bought back was likely to be considerably lower than 5 per cent, he said.
The buyback was ‘‘part of Smiths’ ongoing commitment to ensure shareholders benefit from the group’s underlying performance improvements’’, Boyce said.