IMB launches third share buyback

Building society IMB has launched a share buyback, allocating A$16 million to an off-market tender process.

Shareholders are invited to tender some or all of their shares at discounts of between zero and 14 per cent to the average price of IMB shares over ten days in late January (which was $5.08). The building society will open a tender period on February 23 and close it on March 18.

IMB will determine the buyback price based on the largest discount that will enable it to purchase the amount of capital it decides to buy back. While it has allocated $16 million to the buyback, it may buy back a smaller amount or nothing at all.

This is the third buyback IMB has had since 2012, when it accepted the recommendations of a structural review, which said it should overhaul its capital structure.

IMB is a hybrid; it is a mutual approved-deposit taking institution and also a public company limited by guarantee. Its shares are traded on an exempt market operated by the building society itself.

Consultants who conducted the review found: "The ordinary shares do not sit comfortably with the mutual structure and present challenges for IMB's board in balancing the expectations of guarantee members and shareholder members."

The consultants' view was that the ordinary shares had become an expensive form of capital for IMB because of the level of dividend payments required. They also stood in the way of the group taking up merger opportunities.

At the time, the building society has 4200 shareholder members holding 39.9 million shares and 180,000 mutual members.

IMB was not be able to buy back all of its shares at once due to capital constraints, so the consultants recommended a series of buybacks.

In the second buyback, held in 2013, it acquired 2.14 million shares at a ten per cent discount to the deemed market value of the shares. This was well short of its target, which was a maximum of 14 million shares.