What is an Accelerated Share Repurchase (ASR) transaction?

An Accelerated Share Repurchase (ASR) is an agreement where a company buys back a significant amount of its own stock from a financial institution. The company typically pays an upfront amount, and the financial institution delivers the shares. The final number of shares or the final price may be adjusted later based on the average market price of the stock over a specified period.

Why is Amgen repurchasing its stock?

Amgen is repurchasing its stock as part of its previously announced stock repurchase programs. Companies typically buy back shares to return capital to shareholders, reduce the number of outstanding shares (potentially boosting earnings per share), and signal confidence in their own stock's valuation.

What is the potential impact of the purchase price adjustment?

The purchase price adjustment means the final cost of the repurchased shares could be higher or lower than the initial $1.5 billion. If Amgen's stock price performs strongly during the ASR term, the company might pay more per share or receive fewer shares back if the adjustment is settled in cash. Conversely, if the stock price is lower, the company might pay less or receive more shares back. Settlement in shares could lead to a slight increase in the total number of outstanding shares if the price adjustment requires it, while settlement in cash would not affect share count.

Who is Lehman Brothers OTC Derivatives Inc. in this transaction?

Lehman Brothers OTC Derivatives Inc. is the financial institution acting as the counterparty to Amgen in this Accelerated Share Repurchase agreement. They are selling the shares to Amgen and will manage the pricing and settlement based on the terms of the ASR.

AMGN 8-K: Material Agreements

Summary

Amgen Inc. (AMGN) has entered into a significant $1.5 billion Accelerated Share Repurchase (ASR) transaction with Lehman Brothers OTC Derivatives Inc., effective May 28, 2008. This transaction represents a material definitive agreement and is part of the company's ongoing stock repurchase initiatives. The ASR involves the repurchase of approximately 31.5 million shares of Amgen's common stock. This ASR agreement is structured with a variable term and includes provisions for a potential purchase price adjustment. The final price adjustment will be determined based on the volume-weighted average price of Amgen's common stock during the transaction's term. Investors should note that this adjustment can be settled in either cash or additional shares of Amgen's stock, offering flexibility to the company but also potentially impacting share count and dilution in the future.

Key Highlights

1Amgen entered into a $1.5 billion Accelerated Share Repurchase (ASR) transaction on May 28, 2008.
2The ASR involves the repurchase of approximately 31.5 million shares of Amgen common stock.
3This transaction is part of Amgen's previously announced stock repurchase programs.
4The ASR agreement is with Lehman Brothers OTC Derivatives Inc.
5The final purchase price is subject to adjustment based on the volume-weighted average price of Amgen's stock during the transaction term.
6The purchase price adjustment can be settled in cash or additional shares of Amgen's common stock, at Amgen's option.

AMGEN INC 8-K Report, Material Agreement (May 29, 2008)

Summary

Key Highlights

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