Dutch chip equipment maker ASML said on Thursday it will return about 960 million euros ($1.3 billion) to shareholders in combination with a reverse stock split to optimize its capital structure.
The company said it would finance this with the proceeds from a benchmark eurobond benchmark issue in the coming weeks, subject to market conditions.
Repayment of capital of 2.04 euros per share will be combined with a subsequent 11% reduction in the number of outstanding ordinary shares through an 8-for-9 reverse share split, ASML said in a statement.
The company said it wanted to return excess cash to shareholders and optimize its debt-to-equity ratio.
"We believe this is positive, as the capital structure was far from optimal. It also shows that ASML is not able, or willing, to diversify out of lithography at any price," Petercam analyst Eric de Graaf said in a note.
ASML shares rose 5% to 19.25 euros in early trade, compared with a 1.1% rise of the DJ Stoxx technology index.
Petercam raised its estimates for ASML's earnings per share due to the combination of reduced cash and fewer shares. De Graaf said the positive effect was 2% for 2007 EPS estimates and 7% for 2008 and 2009 EPS estimates.
ASML expected the capital repayment and stock consolidation to be concluded before the end of September, subject to shareholder approval and amendment of ASML's articles of association.
Deutsche Bank and ABN Amro are lead managers for the placement of the eurobond issue, which will be offered to institutional investors outside the U.S. and will subsequently be listed on the Euro MTF market of the Luxembourg Stock Exchange.
A banker familiar with the sale said a road show for the bond deal would be held next week.
The company will hold a shareholders meeting on July 17 to vote on the capital repayment and reverse share split.
ASML is rated Ba1 by Moody's Investors Service and BB+ by Fitch Ratings. Both ratings are the highest in the "junk" ratings category.