KEY POINTS:
Michael Hill is considering selling some of the family jewels as the share price booms on expectation of growth.
Queenstown-based family interests have indicated they will sell down some of their stake in Michael Hill International under its proposed buyback through the NZX.
Any family selldown - which
is subject to the price on offer - is expected to adjust to the diminished number of shareholders.
So the family stake is not expected to reduce from the present 47 per cent.
On Monday, Michael Hill International chief executive Mike Parsell told the NZX the firm would be buying back up to 1.9 million shares, or 5 per cent of the company.
Parsell said the buyback is to improve the balance sheet structure and gearing ratios, taking advantage of the current strong cash flow of the group.
Once acquired the shares will be cancelled.
Michael Hill International director Murray Doyle said the buyback would increase the value of shares and the earnings power for the reduced number of owners.
"The company has been doing very well recently and it has too much equity on its balance sheet.
"Apart from a buyback the other way of dealing with the issue would be to deliver a special dividend.
"But much of the company profits are offshore and the company does not have the imputation credits to do that."
Michael Hill International's share price yesterday was $9.05, an increase of $2.36 from $6.69 on January 10.
Asked whether this was an expensive time to buy back shares, Doyle said that would depend where the price went in the future.
Parsell said the buyback of shares, scheduled to begin today, could continue over the following 12 months.
"However, it is the intention of the board to expedite the buyback of shares within the current share trading windows for directors and officers that ends on April 30, 2007."
Share price growth is underpinned by better-than-expected revenue in the in its half-year results to December 31, which were reported last month..
The report shows promising expansion in Canada.
Michael Hill International's share price levelled off this week, possibly because investors were holding off until the launch of the buyback.
Forsyth Barr analyst Guy Hallwright said the company had performed well, particularly in its Australian assets.
Recent share price movements had to be seen in the context of the volatile movements in the past.
Fisher Funds chief investment officer Warren Couillault said results going back to January and the year to December 30 were positive.