Biotech drug company Amgen (AMGN) is using a modified Dutch auction to buy back $5 billion worth of its shares over the next month, the company announced today. The move raised concerns among some some ratings agencies, but gave the stock a jolt. Shares are up 4.3% in midday trading.
The company said it will buy the shares back at prices between $54 and $60 per share from November 8 through December 7. Through the auction, shareholders can determine how many shares they are willing to sell back and at what price. Amgen will buy all of the shares at the same price, but will not pay a lower per-share price than the price at which the shareholder is willing to sell. That means each shareholder could presumably make more than the price they offered, but will be locked out of the auction if their per-share offer is too high.
“This tender offer reflects Amgen’s confidence in the future outlook of our business and the Company’s long-term value,” said Chairman and CEO Kevin W. Sharer. “Our strong balance sheet and cash flow enable us to complete this transaction in an attractive interest rate environment while also preserving the flexibility to further accelerate the growth of our business through focused, strategic acquisitions.”
The company said it will fund the buyback by issuing senior notes.
Moody’s and Fitch both lowered their ratings on the company’s debt, with Moody’s citing the company’s “more aggressive financial policies.”
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