West Fraser Timber (TSX:WFG) has announced plans to buy back up to $1 billion worth of its own shares.
The forestry company says it is conducting a "modified Dutch auction" with a tender price range of $85 to $98 per share. The purchase price will be the lowest price within that range that will allow the company to buy back the maximum number of shares tendered by shareholders.
West Fraser shares jumped 7% on news of the share buyback and closed Wednesday (July 7) at $93 on the Toronto Stock Exchange.
The company raised its dividend earlier this year after it reported its first-quarter profit rose, boosted by higher lumber prices.
By buying back its shares, a company spreads profits over fewer shares, which increases its earnings per share, a key ratio used to determine a company's financial strength.
The stock buyback offer will commence on July 12 and expire on August 17. The offer represents 10% of the total number of issued and outstanding shares on a non-diluted basis.
