Today MagnaChip announced a $75 million accelerated buyback plan. Importantly, this buyback plan is funded with the $70.2 million deal-break fee MagnaChip is collecting from Wise Road Capital. At today’s closing price, the $75 million buyback represents approximately 8.5% of total MX shares outstanding.
Magnachip initiates $37.5 Million Accelerated Stock Repurchase Agreement
SEOUL, South Korea, Dec. 21, 2021 /PRNewswire/ -- Magnachip Semiconductor Corporation ("Magnachip Corp." or the "Company") (NYSE: MX), announced today that the Board of Directors has authorized the Company to repurchase up to $75 million of the Company's common stock. As an immediate step towards implementing the approved stock repurchase program, the Company has entered into an accelerated stock repurchase agreement (the "ASR Agreement") with JPMorgan Chase Bank, National Association ("JPM") to repurchase an aggregate of $37.5 million of Magnachip's common stock.
Pursuant to the terms of the ASR Agreement dated December 21, 2021, the Company will pay JPM $37.5 million in cash and will receive an initial delivery of approximately 1.0 million shares of the Company's common stock. The final number of shares of common stock to ultimately be repurchased by the Company will generally be based on the average of the daily volume-weighted average stock prices of the Company's common stock during the valuation period of the ASR Agreement, less a discount and subject to adjustments. Upon final settlement of the ASR Agreement, the Company may be entitled to receive additional shares of common stock from JPM or, under certain circumstances specified in the ASR Agreement, the Company may be required to deliver shares of common stock or make a cash payment, at its option, to JPM. The ASR Agreement contains provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances under which the ASR Agreement may be accelerated, extended or terminated early by JPM and various acknowledgments, representations and warranties made by the parties to one another. Final settlement of the ASR Agreement is expected to occur during the fiscal quarter ending March 31, 2022.
"Today's announcement reflects the confidence of the management team and our Board of Directors in Magnachip's financial strength, long-term growth strategy and ability to generate sustainable cash flow," said YJ Kim, Magnachip's chief executive officer. "It is also consistent with our commitment to enhance and return value to our shareholders. Our business has sound long-term fundamentals and we are poised to accelerate our MX 3.0 strategy, which we look forward to articulating in more detail at our investor call on January 6, 2022."
In our view, this is just the beginning of management’s effort to implement shareholder-friendly capital allocation plans. We expect more announcements in the coming weeks. We also think a U.S. or Korea based suiter is likely to make an offer for this undervalued company. We continue to view MX shares as attractive for purchase when trading below $20, especially during periods of market weakness when shares trade in the $17s.
Don’t miss the company conference call scheduled for January 6th at 5:00 pm Eastern for more details.
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