The buyback was initiated after the termination of the planned US$3.1 billion takeover of US-based Talecris Biotherapeutics (Research Triangle Park, NC, USA), following objections by the U.S. Federal Trade Commission (FTC), which declared it was going to block the merger due to estimates that it would substantially reduce competition in the US markets for four plasma-derivative protein therapies. Consequently, and as a result of estimations that the risks and costs associated with legal action against the FTC were too great to make the takeover worthwhile pursuing further, the buyback was initiated on an on-market basis over a 12-month period that started on June 23, 2009, which was deemed to be the most cost and tax efficient way of paying back money to the company shareholders.

CSL will buy back up to 54.9 million shares at market value to give back some of the money it raised for the Talecris takeover, since under Australian Securities Exchange rules, a listed company can buy back a maximum 9% of its issued stock in a 12-month period. CSL will still have around AUD one billion in cash even after completing the buyback, which would allow it to lift its interim dividend by 17%, unfranked, but it will most probably end up holding onto the reserve to keep the company’s options open for spending on research and development or bolt-on acquisitions.

“The cash is not burning a hole in my pocket. We’re happy to have a strong balance sheet,” said Brian McNamee, CEO of CSL, commenting on the Q4 results of 2009, which smashed forecasts with a 23% rise in profit largely due to on strong sales of its swine flu vaccine and a 5% increase in its crucial US plasma businesses, CSL Behring and CSL Biotherapies. “We have tremendous ability to consider bolt-on acquisitions, [and] we see opportunities and good valuations at the moment.”

CSL is the only commercial manufacturer of influenza vaccines in the Southern Hemisphere, and is also the manufacturer of the pandemic H1N1 influenza vaccine Panvax H1N1. CSL has been contracted by the Australian Government to supply 21 million doses of the vaccine.

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