Amgen (AMGN) Stock Tender Offer
Posted: Tue Feb 13, 2018 11:02 pmFor those who like to follow the stock market, Amgen (Ticker: AMGN), a very large biotech company, is having a tender offer in the form of a Dutch Auction. They are looking to buy back $10 billion of stock vs. a current market cap of $126 billion. So close to 8% of the stock.
This one is a bit complicated, but could have potential for some. Here are the details. Amgen is paying somewhere between $175 and $200 a share for the stock, which closed at $175.94 today. To the best of my knowledge there is no odd lot clause, so assume for now at least that everyone will be prorated. In other words, no matter how many shares you buy, expect that only a small portion of them will be taken and that the others will be returned to you.
You could wait for a pullback like we got last week to occur again. I was waiting for a price even lower than we got last week, so I don't have any shares as yet.
The exchange deadline appears to be March 5th (Mon.), so your broker's deadline is likely 2-3 business days before that. Be sure to check with them for the deadline so you know in advance. But you should still have plenty of time to buy this stock.
The deal was first announced on 2/5/18 and the stock was $187.01 when it was announced.
Here is how the Dutch Auction works. People can use any even dollar amount to indicate what price they will accept for their shares. It must be between $175 and $200 per share in this case. Amgen will take the very lowest price that will allow them to buy $10 billion of stock. If you say you will accept $175, you could end up getting $180 or $185 for those shares that are taken. On the other hand, if you say you want $180 and the price they pay is $179, then all of your shares will be returned to you. All shares that are accepted receive the same price no matter what price they indicated they were willing to accept. So, if Amgen pays $179, all shares submitted at prices of $175 to $179 will receive $179. All shares submitted at higher prices ($180-200) are returned to the shareholders.
I'm just using $179 as a random number for this example. I have no clue (even based on my substantial experience with tender offers) what will be paid. I don't know how anyone really could know, especially this early on with all the market volatility we've had recently.
Because this is such a big company (about 721 million shares outstanding) and the amount they will pay doesn't look too great right now, I expect that lots of people will not tender their shares. If the stock price goes up sharply over the next few weeks, that could change. Based on conditions now, I would guesstimate that 20-25% of the shares tendered will be taken. I was way off on my guess for Linn Energy (Ticker: LNGG) because Yahoo! Finance published a number that was inaccurate, so I was dealing with bad data. I don't expect that to happen this time. Even with the bad data on LNGG, I still was able to make a fair profit after commissions and applicable reorg fees.
Again, I haven't bought shares yet, but am watching this one daily. Please don't ask me what I'm going to pay for the stock before I buy it. That way, you (or someone else on this fine site) could place an order for a penny more than I'm paying and take cuts in line. That would NOT be fair.
Other things to consider: Amgen has their next earnings announcement the week of April 24th, so after this deal is completed. Amgen goes Ex-Dividend tomorrow, so expect $1.32 to come off the stock price first thing tomorrow and the stock to be reflected as unchanged. Any news or erratic market conditions could exacerbate the move tomorrow, but expect the stock to be up or down based on a price of $174.62 (not $175.94). Lots of people don't realize that dividends are taken out of the stock price before they are paid out, generally several weeks to a month or more before payment.
One other wildcard factor to consider: Just recently a group of companies consisting of Warren Buffett's Berkshire Hathaway, Amazon (Jeff Bezos) and J.P. Morgan Chase (Jamie Dimon) came out publicly to indicate that they think drug prices in the U.S. are way too expensive. Those are three very powerful entities. This could potentially hurt the price of Amgen, regardless of what happens in the Dutch Auction.
Realize also that if you tender shares in a taxable account, expect this to be a taxable transaction, unless you have losses to carry forward from prior years to offset the gain. Also, if you've had Amgen for a long time and don't know what you paid for it, you might want to consider avoiding this corporate action, as it could potentially trigger an audit by the I.R.S.
You do not have to currently own Amgen to participate in the offer. You could buy it tomorrow or next week if you want and still participate.
This one is a bit complicated, but could have potential for some. Here are the details. Amgen is paying somewhere between $175 and $200 a share for the stock, which closed at $175.94 today. To the best of my knowledge there is no odd lot clause, so assume for now at least that everyone will be prorated. In other words, no matter how many shares you buy, expect that only a small portion of them will be taken and that the others will be returned to you.
You could wait for a pullback like we got last week to occur again. I was waiting for a price even lower than we got last week, so I don't have any shares as yet.
The exchange deadline appears to be March 5th (Mon.), so your broker's deadline is likely 2-3 business days before that. Be sure to check with them for the deadline so you know in advance. But you should still have plenty of time to buy this stock.
The deal was first announced on 2/5/18 and the stock was $187.01 when it was announced.
Here is how the Dutch Auction works. People can use any even dollar amount to indicate what price they will accept for their shares. It must be between $175 and $200 per share in this case. Amgen will take the very lowest price that will allow them to buy $10 billion of stock. If you say you will accept $175, you could end up getting $180 or $185 for those shares that are taken. On the other hand, if you say you want $180 and the price they pay is $179, then all of your shares will be returned to you. All shares that are accepted receive the same price no matter what price they indicated they were willing to accept. So, if Amgen pays $179, all shares submitted at prices of $175 to $179 will receive $179. All shares submitted at higher prices ($180-200) are returned to the shareholders.
I'm just using $179 as a random number for this example. I have no clue (even based on my substantial experience with tender offers) what will be paid. I don't know how anyone really could know, especially this early on with all the market volatility we've had recently.
Because this is such a big company (about 721 million shares outstanding) and the amount they will pay doesn't look too great right now, I expect that lots of people will not tender their shares. If the stock price goes up sharply over the next few weeks, that could change. Based on conditions now, I would guesstimate that 20-25% of the shares tendered will be taken. I was way off on my guess for Linn Energy (Ticker: LNGG) because Yahoo! Finance published a number that was inaccurate, so I was dealing with bad data. I don't expect that to happen this time. Even with the bad data on LNGG, I still was able to make a fair profit after commissions and applicable reorg fees.
Again, I haven't bought shares yet, but am watching this one daily. Please don't ask me what I'm going to pay for the stock before I buy it. That way, you (or someone else on this fine site) could place an order for a penny more than I'm paying and take cuts in line. That would NOT be fair.
Other things to consider: Amgen has their next earnings announcement the week of April 24th, so after this deal is completed. Amgen goes Ex-Dividend tomorrow, so expect $1.32 to come off the stock price first thing tomorrow and the stock to be reflected as unchanged. Any news or erratic market conditions could exacerbate the move tomorrow, but expect the stock to be up or down based on a price of $174.62 (not $175.94). Lots of people don't realize that dividends are taken out of the stock price before they are paid out, generally several weeks to a month or more before payment.
One other wildcard factor to consider: Just recently a group of companies consisting of Warren Buffett's Berkshire Hathaway, Amazon (Jeff Bezos) and J.P. Morgan Chase (Jamie Dimon) came out publicly to indicate that they think drug prices in the U.S. are way too expensive. Those are three very powerful entities. This could potentially hurt the price of Amgen, regardless of what happens in the Dutch Auction.
Realize also that if you tender shares in a taxable account, expect this to be a taxable transaction, unless you have losses to carry forward from prior years to offset the gain. Also, if you've had Amgen for a long time and don't know what you paid for it, you might want to consider avoiding this corporate action, as it could potentially trigger an audit by the I.R.S.
You do not have to currently own Amgen to participate in the offer. You could buy it tomorrow or next week if you want and still participate.
