I am working on a case study of the acquisition of Financebank (and its Turkish and international subsidiaries) in 2006. NBG (Greek bank) makes an offer that can be broken into two components: ownership of the finansbank and ownership of the bank's subsidiaries. However, NBG would sell the international subsidiaries of Finansbank back to the orginal founder (and owner) of Finansbank, which is Ozyegin.
 

The question is - Why would Ozyegin be interested in selling the Turkish operations and buying back the non-Turkish operations? So, generally why would he sell only some parts of the bank and buy back other parts? Any tip in the right direction is welcome.

Companies do buybacks for various reasons, including company consolidation, equity value increase, and to look more financially attractive. The downside to buybacks is they are typically financed with debt, which can strain cash flow. Stock buybacks can have a mildly positive effect on the economy overall.

Step-by-step explanation

Buybacks can boost shareholder value and share prices while also creating a tax-advantageous opportunity for investors. While buybacks are important to financial stability, a company's fundamentals and historical track record are more important to long-term value creation. The effect of a buyback is to reduce the number of outstanding shares on the market, which increases the ownership stake of the stakeholders. A company might buyback shares because it believes the market has discounted its shares too steeply, to invest in itself, or to improve its financial ratios. 

Buybacks tend to boost share prices in the short-term, as the buying reduces the supply out outstanding shares and the buying itself bids the share higher in the market. When excess cash is used to repurchase company stock, instead of increasing dividend payments, shareholders have the opportunity to defer capital gains if share prices increase. Traditionally, buybacks are taxed at a capital gains tax rate, whereas dividends are subject to ordinary income tax. If the stock has been held for more than one year, the gains would be subject to a lower capital gains rate.

When companies pursue buyback programs, this demonstrates to investors that the company has additional cash on hand. If a company has excess cash, then at worst the investors do not need to worry about cash flow problems. More importantly, it signals to investors that the company feels cash is better used to reimburse shareholders than reinvest alternative assets. In essence, this supports the price of the stock and provides long-term security for investors.

When the economy is faltering, share prices can plummet as a result of weaker than expected earnings among other factors. In this event, a company will pursue a buyback program since it believes that company shares are undervalued. Companies will choose to repurchase shares and then resell them in the open market once the price increase to accurately reflect the value of the company. When earnings per share increases, the market will perceive this positively and share prices will increase after buybacks are announced. This often comes down to simple supply and demand. When there is a less available supply of shares, then an upward demand will boost share prices.

There are many ways profitable companies can measure the success of its stocks. However, the most common measurement is earnings per share (EPS). Earnings per share are typically viewed as the single most important variable in determining share prices. It is the portion of a company's profit allocated to each outstanding share of common stock. When companies pursue share buyback, they will essentially reduce the assets on their balance sheets and increase their return on assets. Likewise, by reducing the number of outstanding shares and maintaining the same level of profitability, EPS will increase. For shareholders who do not sell their shares, they now have a higher percent of ownership of the company's shares and a higher price per share. Those who do choose to sell have done so at a price they were willing to sell at.