Bloomberg News

Wal-Mart Plans $15 Billion Buyback, May Boost Walton Stake

June 03, 2011

(Updates shares in ninth paragraph.)

June 3 (Bloomberg) -- Wal-Mart Stores Inc. renewed plans to buy back as much as $15 billion of its shares, potentially bolstering the Walton family’s control of the world’s largest retailer.

The buyback replaces a previous $15 billion repurchase announced June 4, 2010, Chief Financial Officer Charles Holley said today at Wal-Mart’s 41st annual meeting. About 14,000 people attended the gathering in Fayetteville, Arkansas.

Repurchases have boosted the founding Walton family’s ownership to about 48 percent as of March from 38 percent in March 2003, according to Deborah Weinswig, an analyst at Citigroup Inc. New York-based Weinswig estimates the family may gain a majority of the shares by the end of next year.

Ownership of more than 50 percent amounts to a “premium- free takeover of the company,” Charles Elson, director of the University of Delaware’s Center for Corporate Governance, said in an interview before the buyback was announced.

Since March 2003, when the Waltons owned about one-third of the retailer, the shares had gained 15 percent through May 31. That’s about one-fifth of the increase in the Standard & Poor’s 500 Consumer Staples Index. Wal-Mart had acquired about $13 billion in shares under the previous buyback program.

Family’s Control

“Walmart’s share repurchase virtually guarantees that the Walton family will control over 50 percent of the common stock, possibly within a few months,” Per Olstad, acting legal counsel of CtW Investment Group, said in an e-mail. “This could be the last annual shareholder meeting where the company is required to meet the board independence requirements under the NYSE listing standards.” The pension funds affiliated with union-backed CtW hold an estimated 7 million shares in Wal-Mart.

David Tovar, a spokesman for Wal-Mart, said the company has no plans to use NYSE exemptions. The exchange’s rules state that a “controlled” listed company can claim an exemption from having a majority of independent directors and from having fully independent nominating and compensation committees.

“Wal-Mart and the Walton family believe an independent board is an important part of our corporate governance,” Tovar said.

Wal-Mart rose 11 cents to $53.66 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have dropped less than 1 percent this year.

Profit Growth

The company was founded in 1962 when brothers Sam and Bud Walton opened the first store in Rogers, Arkansas. It was incorporated as Wal-Mart Stores Inc., on Oct. 31, 1969 and shares were listed on the New York Stock Exchange in 1972.

Wal-Mart’s “governance is sufficient,” Timothy Hoyle, vice president of research at Haverford Investments, which has $6 billion under management including Wal-Mart shares, said in an interview. “If I am not happy with management or the board, I can sell.”

While profit growth has accelerated, Wal-Mart’s U.S. comparable-store sales have fallen for eight straight quarters as shoppers grapple with rising grocery and gasoline prices and persistent unemployment. To stem the declines, Chief Executive Officer Mike Duke and U.S. Chief Bill Simon have added thousands of products back to the shelves and announced plans to open smaller outlets.

Express Stores

Wal-Mart plans to open 15 Express stores of about 15,000 square feet in Arkansas, North Carolina and Chicago this year. The first Express store in Gentry, Arkansas, will open June 8, and includes take-home meals such as $5.98 pepperoni pizzas. Some Express stores will include a pharmacy and gasoline pumps. The Gentry store carries about 12,000 products, compared with an average of 142,000 at Wal-Mart’s supercenters.

The economy created 54,000 jobs in June, and the jobless rate unexpectedly climbed to 9.1 percent, to the highest level this year, from 9 percent a month earlier, the Labor Department said earlier today.

Confidence among U.S. consumers unexpectedly declined in May to a six-month low as Americans’ outlook for income growth and business hiring worsened, the Conference Board said May 31. Slower than expected job and wage growth means consumer spending, which accounts for about 70 percent of the economy, may remain in check.

--With assistance from Shobhana Chandra in Washington. Editors: James Callan, Julie Alnwick

To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net.

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net.


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