What is an accelerated stock repurchase (ASR) agreement?

An accelerated stock repurchase (ASR) agreement is a transaction where a company buys back its own stock from one or more financial institutions. The company typically pays a lump sum upfront, and the financial institution delivers an initial tranche of shares. The final number of shares repurchased is then determined at a later date based on the market price of the stock during the repurchase period, with potential adjustments.

Why is Amgen undertaking this $6 billion stock repurchase?

Amgen is undertaking this significant stock repurchase as part of its capital return strategy to shareholders. By reducing the number of outstanding shares, the company aims to increase earnings per share (EPS) and potentially enhance shareholder value. This also signals management's confidence in the company's financial health and future prospects.

How will this affect Amgen's stock price?

Stock repurchases can have a positive impact on a company's stock price by increasing demand for the shares and reducing the supply. The expectation of fewer outstanding shares can also lead to a higher EPS, which is often viewed favorably by investors. However, the ultimate impact will depend on various market factors and Amgen's ongoing performance.

When will the full impact of this repurchase be reflected?

Amgen expects the final settlement of these ASR agreements to occur in the third quarter of 2022. While an initial number of shares will be delivered shortly after the agreement date, the final determination of the total shares repurchased will be completed at settlement. The market may begin to price in the impact of the buyback program as it progresses.

AMGN 8-K: Material Agreements

Summary

Amgen Inc. (AMGN) has entered into accelerated stock repurchase (ASR) agreements totaling $6 billion with Bank of America, Morgan Stanley, and Goldman Sachs. These agreements, executed on February 24, 2022, aim to repurchase a significant amount of the company's common stock. The company is utilizing its existing cash reserves to fund these repurchases. This move signals a strong commitment from Amgen to return capital to shareholders and potentially boost shareholder value through a reduction in outstanding shares.

Key Highlights

1Amgen enters into $6 billion in accelerated stock repurchase (ASR) agreements.
2The ASR agreements are with major financial institutions: Bank of America, N.A., Morgan Stanley & Co. LLC, and Goldman Sachs & Co. LLC.
3The company will fund the repurchases using existing cash resources.
4An initial delivery of approximately 23.3 million shares is expected on February 25, 2022.
5The final number of shares repurchased will be based on the volume-weighted average stock price over the ASR term, less a discount.
6Final settlement of the ASR agreements is scheduled for the third quarter of 2022.
7The transaction reflects Amgen's strategy to enhance shareholder returns.

AMGEN INC 8-K Report, Material Agreement (Feb 25, 2022)

Summary

Key Highlights

Frequently Asked Questions