Home / Infectious Disease & Vaccines / September 2011

Unwilling to deal

AMAG rejects MSMB acquisition bid, sticks with plans for Allos merger

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LEXINGTON, Mass.—In response to an unsolicited acquisition proposal from MSMB CapitalManagement at the beginning of August, AMAG Pharmaceuticals' board of directorsreleased a statement stating it has unanimously decided to reject the proposal.The board said that after consulting with its legal and financial advisors, itdetermined that the proposal was not reasonably expected to represent asuperior offer to the planned merger with Allos Therapeutics Inc., which itaffirms is fair to and in the best interests of the company and itsshareholders.

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Kelsey Kaustinen
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Published In

Volume 7 - Issue 9 | September 2011

September 2011

TheAMAG/Allos merger was announced July 20 and will combine the two companies inan all-stock merger with a total equity value of about $686 million, withexpected annual cost savings synergies falling between $55 million and $60million. The agreement states that Allos stockholders will receive 0.1282shares of AMAG common stock for each share of Allos stock they own, andfollowing the merger, AMAG stockholders would own approximately 61 percent ofthe combined company, while Allos shareholders would own the approximately 39percent remaining.

Accordingto a press release from AMAG, the merger will benefit the two companies with astrong balance sheet, global potential—given that both companies have marketingapplications pending in Europe—and a commercial portfolio with products in theU.S. non-dialysis IV iron market and the second-line peripheral T-cell lymphomamarket, both of which are estimated at $400 million.

Dr.Brian J.G. Pereira, CEO of AMAG, said in a press release regarding the mergerthat "it creates a combined company with an enhanced commercial presence inattractive market segments supported by a more efficient organizationalstructure."

In thewake of the announcement, MSMB, an investor in AMAG, made an offer on Aug. 2 toAMAG's board to acquire all of the company's outstanding shares for $18 percash, for a total price of $378 million. The offer represents a 25-percentpremium on the price of $14.39 that AMAG's shares closed at on Aug. 2, and isconditioned on the completion of due diligence and other customary provisions.

"MSMB isa long-term investor in AMAG and believes that the management's currentstrategy does not protect the interests of AMAG's stockholders or ensure AMAG'slong-term viability. I believe that our offer is superior and more beneficialto AMAG's stockholders than the proposed no-premium merger between AMAG andAllos Therapeutics," said Martin Shkreli, chief investment officer of MSMB, ina press release.

In aletter to AMAG's board, Shkreli noted that AMAG's stock "has not reactedpositively to the proposed transaction with Allos," as shares have dropped 25percent since AMAG agreed to the merger, and that MSMB's offer provided aviable and superior alternative to a "poorly viewed transaction." If allowed toconduct due diligence and negotiate a definitive acquisition agreement, theletter noted, MSMB "could be prepared to increase the price per share." Shkreliadded that MSMB would prefer to work with AMAG's board to come to an agreement,but that if AMAG is unwilling, MSMB will make an offer directly to thecompany's shareholders, noting that "it is imperative that the company be soldnow, the transaction with Allos terminated and further erosion of stockholdervalue be prevented."

MSMBrequested a response by Aug. 15, adding that if AMAG did not respond by thatdate, "we reserve the right to take whatever steps we deem necessary topreserve and maximize stockholder value." The company received AMAG's rejectionof the offer on Aug. 8.

As of press time, no further announcements hadbeen made about whether MSMB plans to make a better offer or whether the proposalwill go hostile, and neither company was willing to comment on the situation.

Unwilling to deal

About the Author

Kelsey Kaustinen

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September 2011

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