Reuters to buy back shares: Surplus pounds 350m should be returned to investors, says chairman

REUTERS HOLDINGS, the international news and electronic dealing group, yesterday unveiled plans to make inroads into its pounds 700m cash mountain by distributing pounds 350m in a tax-efficient way to shareholders on both sides of the Atlantic.

The company, due to report interim results today, is proposing to buy 25 million shares, or about 5.8 per cent of its issued share capital, at pounds 14 each in the form of a tender offer to shareholders.

Sir Christopher Hogg, chairman, said that Reuters, which has been highly cash-generative during the 1990s, had concluded that pounds 350m of its cash resources was surplus to immediate requirements and should be returned to shareholders.

Peter Job, chief executive, said the decision followed a review of the company's long-term requirements for capital for existing businesses, for internal investments in new programmes and for acquisitions.

He added: 'A realistic assessment of the timing of these requirements indicated that a sizeable amount of Reuters' cash would continue to benefit profits only by virtue of being invested in money markets and that current initiatives and plans could comfortably be funded from Reuters' substantial financial resources and future cash flows.'

According to Reuters and its advisers, SG Warburg and JP Morgan, this method of repurchase would allow most shareholders to receive a substantial tax credit, or in the case of tax-exempt investment funds, a tax refund.

This is because an offer to buy by tender, as opposed to a purchase in the open market, would allow Reuters to retain the benefits of advance corporation tax that has aleady been paid. Reuters Holdings receives franked income from the dividends it gets from its ownership of Reuters.

Reflecting the tax benefits to tax-exempt funds, which own around 35 per cent of the company's share capital, Reuters shares ended up 36p at 1,440p after touching 1,455p.

But Sir Christopher said the board believed all shareholders would benefit from the repurchase since it would lead to an increase in Reuters earnings per share.

Reuters has invested heavily in developing new products such as its Globex after-hours electronic trading system and Dealing 2000 Phase 2 while moving into other media through Reuters Television and membership of the consortium that last year bought Independent Television News.

But in 1992 the company's cash balances rose by pounds 207m to pounds 710m, or 168p a share, despite a pounds 40m - or 25 per cent - rise in capital spending to pounds 199m, a 25 per cent rise in dividends and a 17 per cent rise in development spending to pounds 78.5m.

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