Grainger Announces Permanent Change, Intent To Buy Back $3 Billion In Common Stock

CHICAGO — Grainger announced today that its Board of Directors has approved the purchase of $3 billion of its common stock over the next three years.  The share repurchase will be financed with a combination of cash and the issuance of new, permanent debt.  In addition, the Board increased the repurchase authorization to 15 million shares.  This replaces a prior program of 10 million shares approved in April 2014. 

“This program reflects our confidence in the business and future prospects of the company and better optimizes our balance sheet,” said Chairman, President and Chief Executive Officer Jim Ryan.  “We are committed to creating shareholder value and strongly believe in the strategy we have in place for future growth. The timing, size and structure of the share repurchase and debt issuance preserve our ability to continue to invest in the business while maintaining a very strong balance sheet.”

The company had previously announced a commitment to repurchase approximately $400 million in shares during 2015.  Consistent with prior practice, these purchases will continue to be funded largely with internally generated cash.  Shares purchased beyond this amount in 2015 are expected to be financed with permanent debt.  The company also intends to continue its 43-year history of increasing its annual dividend. 

The following table represents the expected pace and funding of the share repurchases:

The additional buybacks will begin later this month and are expected to be accretive to 2015 earnings in the range of $0.08 to $0.12 per share.  The company expects to issue $1 billion in long term debt in June 2015 to help fund the program.  The exact number of shares bought back will be determined by the end of 2017.

The company is committed to operating with a debt to EBITDA ratio that is in the 1.0-1.5x range.  “The addition of this level of permanent debt signals an important change in our capital structure and strikes the right balance between rewarding shareholders, making our capital structure more efficient and preserving the company’s ability to pursue both organic growth and acquisition opportunities,” said Ryan.