AutoZone OKs share buyback increase up to $500M

The auto parts retailer also said it will increase its debt leverage to "better optimize its current capital structure."

AutoZone said it signed an agreement with shareholder ESL Investments Inc., a hedge fund owned by billionaire investor and Sears Holdings Corp. Chairman Edward Lampert. The fund currently owns about 36.2 percent of AutoZone's outstanding common stock.

Under the deal's terms, if ESL's stake reaches 40 percent of shares outstanding, the firm will vote its shares above that mark in a similar proportion to other shareholders.

That threshold will be lowered to 37.5 percent after the 2009 annual meeting, AutoZone said.

AutoZone said the deal also states that out of three directors it plans to add to its board in the near future, two will be nominated by ESL. The move will increase the board to 12 directors.

After that, the company said it will cut its board back to 10 members ahead of the 2008 annual meeting in December.

Lampert stepped down from fellow auto retailer AutoNation's board last year to devote more time to ESL Investments and Sears. He is currently AutoNation's largest shareholder.