U.S. News

J&J Announces $10 Billion Stock Buyback Plan


Johnson & Johnsonsaid on Monday its board of directors approved the repurchase of up to $10 billion of its common stock.

The company -- which makes an array of prescription drugs, medical devices and consumer products -- said the repurchase program has no time limit and that shares would be bought on the open market based on market conditions.

Johnson & Johnson , which is based in New Brunswick, N.J., has almost 2.9 billion shares outstanding. It will finance the stock repurchases through a combination of available cash and debt.

Standard & Poor's said Johnson & Johnson's investment grade ratings of "AAA/Stable" would not be affected. The agency added the company will most likely use debt financing for most, if not all, of its share repurchases.

The company said it will finance the buyback with available cash and debt, and expected to retain its triple-A credit rating.

Fitch backed the company's investment grade default rating of "AAA," senior unsecured debt rating of "AAA," and subordinate debt rating of "AAA."

While Fitch believes Johnson & Johnson will continue to manage its credit profile to support an 'AAA' rating, this program does materially limit its flexibility within its rating category over the short term, said Fitch.

Credit agencies Fitch Ratings and Standard & Poor's Ratings Services on Monday backed debt ratings on pharmaceutical and consumer products giant Johnson & Johnson.

Premature Note

Those investors who caught an S&P ratings bulletin released in error roughly an hour and a half before Johnson & Johnson's share buyback announcement will have had a lucrative tip-off.

By the time the official Johnson & Johnson press release came out, the company's shares had already risen almost 1 percent.

The S&P release at 10:25 am New York time, stating that Johnson & Johnson's recently announced $10 billion share buyback had no impact on its rating. But what share buyback? Johnson & Johnson didn't announce it until 11:53 am.

The S&P statement was withdrawn at 10:54 am, with an editor's note simply stating the bulletin had been "published in error."

But those investors who had seen it pushed Johnson & Johnson's stock up steadily shortly after the first S&P bulletin hit. The withdrawal added fuel to the buying, with more investors alerted to the prematurely published note.

The S&P bulletin was published again at 12:14 pm, with no changes to the text.

Related Tags