Deutsche Post announces €1.0bn share buyback programme

German postal giant Deutsche Post said Tuesday it plans to buy back up to 1.0 billion euros ($1.1 billion) of its own shares over the next year.

"The share buyback programme starting in March 2016 is restricted to a duration of one year and a notional amount of up to one billion euros," Deutsche Post said in a statement.

"The purchased shares will either be cancelled, used to service long term management incentive programmes or to meet possible obligations" for convertible bonds, it added.

A company normally buys back its own shares if management thinks the shares are undervalued, as repurchasing them will reduce the number of outstanding shares and push up the price.

The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price.

Deutsche Post said it would "keep the capital market informed about the progress of the share buyback programme on its web site."

"The decision to initiate a share buyback programme is in line with the group's corporate finance policy and is to be seen against the background of the strong free cash flow generation" for 2015, the statement said.

Investors welcomed the news and Deutsche Post shares were the biggest gainers on the Frankfurt stock exchange following the announcement, shooting up 6.9 percent to an intraday high of 24.12 euros in a largely stable market.