AutoZone (AZO) Raises Buyback By $500M, Enters Agreement With Major Holder ESL

June 26, 2008 7:16 AM EDT

AutoZone, Inc. (NYSE: AZO) announced that its Board of Directors has authorized the repurchase of an additional $500 million of the Company's stock, bringing its current unused repurchase authorization to $608 million.

Additionally, as part of the Company's ongoing evaluation of its capital structure, the Company has decided to increase its adjusted debt / EBITDAR leverage metric to at least 2.5x from the previously established 2.1x.

AutoZone also announced that it has entered into an agreement with ESL Investments, Inc. setting forth certain understandings and agreements concerning ESL's continued investment in AutoZone. ESL currently owns approximately 36.2% of the outstanding AutoZone common stock. Pursuant to the agreement with ESL, the Company has agreed to use its commercially reasonable efforts to achieve at least the new 2.5x adjusted debt / EBITDAR leverage metric by the end of the Company's second quarter fiscal 2009.

The agreement with ESL provides, among other things, that, should ESL's percentage ownership of Company shares increase above certain thresholds, ESL will vote its shares owned above such thresholds in the same proportion as shares unaffiliated with ESL are actually voted. The initial threshold is 40%, which will reduce to 37.5% following the 2009 annual meeting of stockholders. The agreement also states the Company's intention to add three directors in the near future, two of whom will be identified by ESL for consideration by the Company's Nominating and Corporate Governance Committee, thereby increasing the Board's size to 12 members. Thereafter, the Company expects to reduce the Board's size to 10 members in conjunction with the 2008 annual meeting in December. The agreement also contains certain other protections for non-ESL affiliated shareholders as well as for ESL.

Related Categories

Corporate News
Stock Buybacks

Stocks Mentioned

Related Entities

• Edward Lampert
• ESL Investments

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