Shares of drug-maker Warner Chilcott (NASDAQ:WCRX) are trading in immense volume today, nearly 5x daily average, and pushing the stock price down by 5%. The move comes after the board announced last night that it ceased looking for a buyout partner and will instead be releasing a special dividend and initiating a $250MM share buyback program. The dividend announcement, planned for $4, comes as little surprise to analysts since the company did the same thing last year with an $8.50 dividend. The plan will be funded by existing cash and by borrowing $600MM. Investors will also be pleased to hear that WCRX will be instituting an annual dividend of $0.50 (roughly 3%).
The news comes after the company announced in April that it was discussing selling the company and had been in talks with some buyers. Last night management reiterated it’s guidance for $3.55 to $3.65 EPS this year. Although the dividend comes as a bonus to investors, the introduction of new debt may have some analysts nervous. The market reflects this and disappointment on termination of acquisition talks, however, shares are likely to bounce back soon.