Invest Skeptically

Barry Critchley at the National Post reported yesterday, in Who is Sun Life’s seller?, of Sun Life Financial’s strange plan to repurchase shares from “an arm’s-length third-party seller” between December 12, 2007 and December 31,
2007. Critchley quotes one market participant as saying, “here is a clear preference being afforded to the vendor, which would otherwise have to take the risk of disposing of the shares over time and possibly depressing the market price as it does.”

This type of behaviour is bound to attract criticism from other shareholders and market watchers. It can’t be anything but bad PR. So what would motivate an issuer to perform such a transaction? Are they getting good fees to do this? Is this is a favour to a long-standing and profitable client? It’ll be interesting to see if any further disclosure from the company is offered on this topic.

Here’s the Sun Life press release:

Sun Life Financial to purchase up to 2.55 million Common Shares for cancellation in Private Purchases

TORONTO, Dec. 7 /CNW/ - Sun Life Financial Inc. (TSX/NYSE: SLF) announced today that it intends to purchase for cancellation up to 2.55 million (0.46 per cent) of its common shares currently outstanding pursuant to private agreements between Sun Life Financial Inc. and an arm’s-length third-party seller (the “Private Purchases”) between December 12, 2007 and December 31, 2007. The shares purchased for cancellation pursuant to the Private Purchases will be included in calculating the maximum number of common shares that the Company may purchase through its normal course issuer bid share repurchase program that was announced on January 11, 2007.

The Private Purchases will be made pursuant to an issuer bid exemption order issued by the Ontario Securities Commission and a Notice of Intention to make an exempt issuer bid filed with the Autorité des marchés financiers in the Province of Quebec. The price that the Company will pay for the shares purchased under the Private Purchases will be negotiated by the Company and the seller, provided that in no circumstances will the price paid for the shares be greater than the closing market price of those shares on the Toronto Stock Exchange on the dates of the purchases. The Company believes that purchasing its shares under the Private Purchases at a price below the market price of its shares is an appropriate use of corporate funds.

None of the directors or senior officers of the Company, nor any associates or affiliates thereof or of the Company, nor any person holding 10% or more of any class of equity securities of the Company, nor any associates thereof are eligible to sell shares pursuant to the Private Purchases since the Company intends to purchase shares only from the arms-length third-party seller.