A quieter session for shares of Ikon
When a $500 million buyback was announced last week, price and volume had climbed.
Shares of Ikon Office Solutions Inc. settled down yesterday after last week's wild ride up on Wall Street.
Last Wednesday, the stock, buoyed by news of the Malvern company's plan to repurchase $500 million worth of its stock, rose 17 percent, or $1.76, from Tuesday's close of $10.62 - its lowest in nearly two years.
Trading that day was heavy as 3.3 million shares changed hands - more than five times the normal volume.
The stock rose an additional 29 cents Friday, but fell 27 cents yesterday to $12.40 in trading that was more than double average daily volume.
Ikon, a distributor of Canon, Ricoh, and other copy machines, had $4.2 billion in fiscal 2007 revenue. It employs 25,000 worldwide and 1,000 in the Philadelphia area.
Wednesday's heavy trading followed Ikon's announcement the day before that its board had approved a $500 million share-repurchase plan, allowing it to buy back as much as one-third of its outstanding stock by the end of 2008.
The move placates one of Ikon's largest investors, Warren G. Lichtenstein and his company, Steel Partners II L.P., of New York.
Steel Partners II, which owns 10.5 percent of Ikon's shares, had been pressing the company to spend $850 million to buy 39 percent of its shares at $17.50 a share, a considerable premium over the current price.
When a company buys back stock, its earnings per share increase because earnings are divided among fewer shares. That tends to drive up the share price.
In Tuesday's announcement, Ikon said it would spend $295 million immediately to buy shares at $13 to $15 each.
It will buy the remaining $205 million in 2008.
Under the terms of the repurchase, Lichtenstein will no longer push for a seat on Ikon's board and will stop sending communications to the company advocating a repurchase plan or offering to buy the company. The so-called standstill agreement will last until May 2009.
Ikon will fund the repurchase with cash and by borrowing $150 million from Wachovia Investment Holdings. In response, Standard & Poor's, the rating agency, put Ikon on its credit watch, with a "BB" junk-bond rating.