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Citigroup to Increased Buybacks up to $15.6 billion of Common Stock

Citigroup plans to repurchase up to $15.6 billion of common stock over the next year and double its quarterly dividend to 32 cents per share, bringing total payouts to $18.9 billion.

The total payout is 54% more than the Fed allowed last year and about 1.25 times the profits that is expected the Citigroup to earn over the next four quarters. Analysts had expected Citigroup would win the right to increase payouts to roughly 1.12 percent of annual profits.

The payout projection comes on the heels of the Federal Reserve approving Citigroup's capital plan on Wednesday, making for the third consecutive year it has gotten a green light. The bank had failed in 2014 and 2012, significantly setting back its payback plans. 

 

Citigroup shares were up 2.3% in after hours trading at $66.68, compared with a stated net worth of $65.94 per share as of March 31.

The company have retained a significant amount of capital in excess of what is needed to prudently operate and invest. The bank can begin returning a higher level of capital to shareholders and improve its overall returns.

The recent strategy is another stepping stone for Citigroup’s recovery from losses in the financial crisis. Citigroup took three bailout infusions from the government in 2008 and 2009.

Citigroup built excess capital through additions from net income and by shedding assets that required capital support. It has sold an assortment of ill fitting assets and pulled out of about 20 consumer markets.

 

Already, the bank's stock has rebounded this year as investors have bet on a big capital payout. Citigroup stock has returned 10.3% so far in 2017, more than any of its big rivals.

The news of a better than expected payout will give the bank additional momentum as it prepares for a day of public investor presentations next month, at which it will detail growth initiatives.

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Amazon to Acquire Whole Foods for $13 Billion

Amazon to acquire US grocery retailer Whole Foods for $US13.7 billion. Whole Foods shares jumped 27% to $41.99 in New York, bringing them close to the transaction price. Amazon shares gained 3.2% to $995. 

The company has agreed to pay $42 a share in cash for the organic food chain, including debt a roughly 27% premium to the stock price. Whole Foods co-founder, John Mackey will continue to run the business. 

The transaction also may help Amazon sideline Instacart Inc, a start-up that has delivered grocery orders from Whole Foods stores in more than 20 states and Washington, D.C. 

The bid signals Amazon's growing intent to dominate groceries and raises risks for Australian retailers ahead of its local launch. Its latest acquisition, which is the biggest in Amazon's 20-year history and gives it a significant bricks and mortar presence, may alter the company's plans for its Australian retail launch, which it confirmed in April.  

The deal is subject to approval by Whole Foods shareholders. The upscale grocer has 460 stores in some of North America's most desirable locations. The two companies said Amazon would continue to operate these stores under the Whole Foods brand.

 

Amazon previously contemplated a takeover of Whole Foods last fall but it didn’t pursue a deal. The e-commerce company revisited the idea after Jana Patners one of the executive investor stepped in.

The deal is more about getting a distribution network for groceries. It has spent years trying to break into delivering groceries but hasn’t been as successful as in other categories. 

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Berkshire Hathaway Acquired 200 Million Stakes in Lanxess AG

Berkshire Hathaway acquired a $200 million stakes in Lanxess AG. Lanxess shares jumped 2.9 percent to 65.06 euros by 0936 GMT after the news, even though the stock was trading without the rights to a 0.70 euro/share dividend for the first time.

In a regulatory filing, Lanxess said that Berkshire Hathaway’s General Reinsurance subsidiary took a stake that reached just over 3 percent on May 19. The shares held by General Re  whose total financial investments excluding cash holdings stood at about $22 billion at the end of last year, were worth about 180 million euros ($200 million) at that time.

General Re’s stake in Lanxess crossed the 3 percent threshold after Lanxess on May 11 beat consensus estimates for first-quarter earnings on strong sales of engineering plastics and synthetic rubber, but the company warned at the time that demand would soften later this year. 

Shares in Lanxess, a former unit of Bayer whose products include pesticide ingredients, construction pigments and leather chemicals, earlier this month reached four-year highs. The company has said that after recent acquisitions worth a combined 2.6 billion euros more strategic steps could be in the offing in the second half of the year.

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