High-Octane Buyback Lifts Spirits at AutoNation

Ed Lampert's love of share buybacks has the engine humming at AutoNation(AN Quote), the car dealership of which he is the largest owner. But some observers wonder if the fuel will prove too rich.

AutoNation disclosed plans Tuesday to borrow more than $1 billion to buy back about one-fifth of its publicly traded stock, an announcement that lit a fire under the recently moribund shares. Lampert, best known for masterminding the takeover of Sears(SHLD Quote) by Kmart, said he will sell some of his 77 million AutoNation shares in the deal.

And no wonder: The deal is a good one for shareholders. Under the offer, AutoNation will buy up to 50 million shares for $23 apiece, a 10% premium to Monday's closing price. At the same time, the company will refinance $323.5 million of its 9% senior notes due in 2008 and replace that debt with about $1.35 billion of a bank and bond facility. ...