Amgen plans to buy back $5bn shares

Biotech drug maker, Amgen said Monday that it planned to buy back up to $5bn of its stock in a modified Dutch auction tender offer.The Thousand Oaks Californian, company will purchase the shares for between $54 and $60 each.Two credit ratings agencies, Moodys and Fitch, lowered their ratings on Amgen Incorporated debt after the buyback announcement.But Amgen shares climbed $2.46, or 4.5 per cent, to $57.63 in late morning trading.The modified Dutch auction tender offer allows shareholders to state the amount of shares they wish to tender and the price they are willing to pay within the companys range. Amgen then will determine the lowest per-share price that enables it to buy $5bn in stock.It will pay the same price for all shares purchased in the offer so that it may buy some stock at a higher price than the shareholder indicated. But the company said it would not make purchases from a shareholder at a price lower than the stockholder indicated he or she wanted.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, Chairman and CEO, Mr. Kevin Sharer, said in a statement.Amgen Incorporated will hold a public offering of senior notes to help pay for the tender offer. BofA Merrill Lynch, Morgan Stanley, JP Morgan and Citigroup are acting as joint book-running managers for the offering.Both Moodys Investor Service and Fitch Ratings downgraded Amgen following the Monday announcement. Moodys dropped the companys senior unsecured rating one notch to Baa1 from A3. The new rating is still investment-grade.Moodys said in a statement the downgrade reflected Amgens more aggressive financial policies, which are expected to lead to a big increase in debt over the next several years.The `Baa1 rating continues to reflect Amgens strong position as the worlds largest stand-alone biotechnology company, its high margins and its good cash flow, Moodys said, also citing the companys growing cash balance.Fitch downgraded Amgens issuer default, senior unsecured debt and bank loan ratings two notches to its second-lowest investment grade rating, BBB, from A-. Its rating outlook for the biotech is stable.
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