TRC’s Tender Offer Tough One for Amgen

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Pity the owners of 7,871 shares of Amgen Inc. who so far have agreed to sell their stock to TRC Capital Corp., apparently without first checking whether they were going to get a premium on their stake.


Those investors may not have realized that TRC’s original May 9 offering price of $60.10 a share represented a 4 percent discount to Amgen’s close the day before. Or that when TRC lowered its bid to $53.75 on May 18 (1 percent below Amgen’s close that day), those who agreed to sell at $60.10 would instead be paid the new, lower price or even less.


TRC Capital, a Toronto investment firm specializing in so-called mini-tender offers, is not obligated to provide the same level of disclosure and protection that the U.S. Securities & Exchange Commission imposes on most tender offers, so long as it announces that it will buy less than 5 percent of a company’s stock.



Opportunists or ‘tender trolls’?

Critics who deride firms like TRC Capital as “tender trolls” point out that these types of deals tend to target small, often unsophisticated individual holders of stock of companies in turmoil. The belief is that many who tender their shares aren’t paying attention to the stock price or mistakenly believe the offer is for a premium price.


The Thousand Oaks-based biotech’s share price has fallen by nearly a third since mid-January, first triggered by safety concerns about its top-selling anemia drug, Aranesp. Shares closed at $54.57 on May 24.


An Internet search turns up numerous instances of companies including Medtronic Inc., Halliburton, Schering-Plough Corp., Tiffany & Co. and Kraft Foods Inc. that were forced to issue press releases in recent years after TRC Capital launched unsolicited mini-tender offers that undercut their share price. Amgen warned its investors via a press release the day TRC Capital lowered its bid. While TRC Capital’s May 18 press release does refer to a process by which investors can back out of the offer before it closes on June 8, past mini-tender takers often haven’t been as lucky. The SEC’s Web site devotes a section to educating investors on how to evaluate mini-tender offers, and has taken enforcement action against firms in the past.


“The abuses in certain types of mini-tender offers have been a source of complaints to the SEC,” said SEC spokesman John Heine, who declined to say whether TRC Capital is, or has been investigated by the regulator. TRC Capital Chief Executive Lorne Albaum could not be reached for comment.



Another irritant for Amgen

In the grand scheme, TRC Capital’s bid is likely to only affect a small number of investors the vast majority of Amgen’s 1.2 billion-share public float is held by mutual funds and other institutions but responding to the unsolicited offer is an additional irritant for a company fighting fires on several fronts.


In addition to coping with the prospect of slower sales growth for Aranesp, Amgen is facing nearly a dozen shareholder lawsuits, inquiries by the New York attorney general and a congressional committee over its marketing and sales practices, a separate SEC inquiry into the timing of public disclosures and a possible reduction in Medicare reimbursement for Aranesp and Epogen, an older anemia drug.


Amgen is not above trying to get a good deal on its own stock. The company, whose board in December authorized another $5 billion share buyback program, last week sold $4 billion in senior notes that will fund around $3 billion in share repurchases.

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