8-KOther Events

AbbVie Inc. 8-K Report, Corporate Update (May 27, 2015)

Filed May 27, 2015For Securities:ABBV

Summary

AbbVie Inc. (ABBV) announced on May 26, 2015, that it entered into an accelerated share repurchase agreement with Morgan Stanley & Co. LLC for $5.0 billion of its common stock. This significant capital allocation decision underscores management's confidence in the company's value and its commitment to returning capital to shareholders. The repurchase is being executed in connection with AbbVie's recently completed acquisition of Pharmacyclics, Inc., indicating a strategic move to offset potential dilution or to rebalance its capital structure following the transaction. Investors should note that an initial delivery of approximately 68 million shares is expected on May 27, 2015, representing about 90% of the prepayment amount. The final settlement, based on volume-weighted average prices, is anticipated by the end of the fourth quarter of 2015. This substantial buyback program signals a proactive approach to shareholder returns and capital management in the wake of a major acquisition.

Key Highlights

  • 1AbbVie entered into a $5.0 billion accelerated share repurchase (ASR) agreement with Morgan Stanley.
  • 2The ASR agreement is part of AbbVie's ongoing commitment to returning capital to shareholders.
  • 3The share repurchase is in connection with the recently completed acquisition of Pharmacyclics, Inc.
  • 4An initial delivery of approximately 68 million shares is expected on May 27, 2015.
  • 5The number of shares repurchased will be based on the volume-weighted average price during the term, less a discount.
  • 6Final settlement is expected before the end of Q4 2015.
  • 7The agreement was entered into pursuant to AbbVie's previously disclosed share repurchase authorization.

Frequently Asked Questions

The primary purpose of this accelerated share repurchase agreement is to return capital to AbbVie's shareholders and to manage the company's capital structure in light of the recently completed acquisition of Pharmacyclics, Inc. It also reflects management's belief that the company's stock is undervalued.

Morgan Stanley is expected to deliver an initial tranche of approximately 68 million shares on May 27, 2015. The final settlement, where the exact number of shares will be determined based on market prices over the repurchase period, is expected to occur before the end of the fourth quarter of 2015.

The total number of shares AbbVie will ultimately repurchase will be based on the daily volume-weighted average price of its common stock during the term of the agreement, minus a discount. There are also provisions for adjustments to the final number of shares based on the terms of the agreement.

This significant share repurchase, especially following a major acquisition, suggests a strong focus on shareholder returns and potentially a strategy to offset any dilution from the acquisition or to optimize the capital structure. It demonstrates management's confidence in future cash flows and the company's valuation.