Panera Shares Surge on Activist Support for Buyback Program

Apr 16 2015 | 8:17pm ET

Panera Bread has authorized $500 million in new debt to fund a buyback program after engaging "in a constructive dialogue" with activist hedge fund Luxor Capital Group. 

Shares surged double-digits on Wednesday after the company announced it has boosted the buyback program to $750 million. Over the next year, the firm will buy back $500 million in shares with cash on hand, cash flow, and the new debt. 

The company also announced that it is planning to refranchise between 50 and 150 locations this fiscal year, and will sell and refranchise 73 stores. 

Panera's board and management team likely received their blessing from activist hedge fund Luxor Capital, which joined PW Partners Atlas Fund II to push for operational changes and increased buybacks at BJ's Restaurants. 

Robert W. Baird analyst David Tarantino said in a note on Thursday that the company's moves "appeared motivated by proposals from activist investor Luxor Capital.” 

In the process, Tarantino wrote that he was increasing his earnings estimates for the company: “Although the near-term earnings picture remains cloudy, we believe shareholder-friendly actions amid the presence of an activist investor can support more positive investor sentiment.”

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