Axa SA, the French insurance company decided to sell off its asset management business to BNP Paribas for €5.4 billion in 2024, wishing to focus more on its core insurance operation. Of the €5.4 billion received, Axa decided to apply €3.8 billion to share repurchases to counterbalance the earnings impact (as reported in the Financial Times).
A share repurchase will not counterbalance the earnings impact. It will reduce earnings because those from its asset management would be lost, as would those earned by reinvesting the €3.8 billion. However, with fewer shares outstanding, EPS likely increases. But, if the repurchase is at fair market value, there is no value enhancement for the firm’s shareholders.
Of course, if Axa had no use for the €3.8 billion, it is correct to pass it out to shareholders as they might have a better use for it than Axa.