AMAG cuts hedge fund to stay with Allos
This article was originally published in Scrip
AMAG Pharmaceuticals' board of directors has "unanimously" decided to oppose the unsolicited bid for the company by MSMB Capital Management as it is "not reasonably expected to result in a superior offer to the merger with Allos Therapeutics".
The decision sent AMAG's share price down to $13.72 (8 August), a 13% decrease over the previous day's close.
MSMB, a New York-based hedge fund, was so displeased with the idea of a merger between AMAG and Allos that on 3 August it offered $18 a share in cash for the AMAG shares it did not already own, representing a 25% premium to the stock's closing price of $14.39 prior to the offer, valuing the bid at around $381 million (scripintelligence.com, 4 August 2011).
In July, AMAG announced plans to buy Allos in a stock transaction which it claimed would bring synergies to both firms, both of whom have launched disappointing products. The companies said that a merger could lead to annual savings of $55 million to $60 million (scripintelligence.com. 21 July 2011). The news sent AMAG's share price plummeting. On 19 July, the day prior to the Allos announcement, AMAG's share price was $19.07.
When MSMB's bid was announced, its chief investment officer Martin Shkreli admitted his offer was opportunistic. "I see they are in a state of weakness, so I'm pouncing," he told Scrip. However, investors responded positively to the new bid, and AMAG's share price rallied by more than 10% on the day to close at $16.00.
In a letter to AMAG's board when he made the offer, Mr Shkreli said: "The company's common stock has not reacted positively to the proposed transaction with Allos and the offer from MSMB provides the company's stockholders a viable alternative to this poorly viewed transaction."
Mr Shkreli had also indicated to Scrip that he was willing to raise his offer. "If I sign a confidentiality agreement with them and they show me that the business is on a robust trajectory, and that other companies have wanted to buy the firm for $30 a share or something like that, I'd have to raise my offer to make it fair."
Mr Shkreli claimed that AMAG management seemed to be taking his offer seriously, and that the firm's investment bank has contacted him. MSMB owns around 5% of AMAG, according to Mr Shkreli.