Spain's Naturgy plans $2.6 billion share buyback

By Pietro Lombardi

MADRID (Reuters) - Spain's Naturgy plans to buy back almost 2.5-billion euros ($2.6 billion) of its shares, up to 10% of its capital, then resell them in the market, the power company said on Thursday as it pledged to increase its free float.

Naturgy shares rose 5.2% after it also promised to raise dividends until 2027 and reshape its board of directors, seeking to boost investor confidence following recent ownership changes.

Naturgy was the target of a failed takeover attempt last year and saw the entry of BlackRock into its capital.

More recently, Australian investment fund IFM, Naturgy's fourth largest shareholder, moved to seek a second seat on the board.

The performance of Naturgy's shares has also been hit by its limited free float - or shares available to the public for trading.

Buying back shares to then place them on the market will help increase its free float and return to the main stock market indices, Executive Chair Francisco Reynes told analysts.

"We believe Naturgy is using its balance sheet to help fix issues of its reference shareholders," RBC analyst Fernando Garcia said in a note.

If the plan moves ahead, Naturgy will pay 26.5 euros a share and expects its main shareholders to participate in the offer in proportion to their stake.

The company said it would raise the dividend paid out of 2024 results to 1.60 euros a share, up from 1.40 euros the previous year. Shareholders will see their remuneration gradually increased to 1.90 euros a share in 2027.

And at the next general meeting on March 25, shareholders will be asked to approve an expansion of the board to 16 members from the current 12, a change that would allow the company to meet IFM's request to have a second seat, it said in a statement.

Under the plan, Spanish holding firm Criteria, which owns a 26.7% stake, would have four seats on the board, up from three currently. BlackRock - which got its stake through the acquisition of investment fund GIP - and private equity firm CVC each own more than 20%, and would both see their board representation increase to three from two at present.

Naturgy posted a 4.3% decline in 2024 net profit of 1.90 billion euros.

($1 = 0.9575 euros)

(Reporting by Pietro Lombardi; Editing by Inti Landauro, Helen Popper and Emelia Sithole-Matarise)