Thursday, October 20, 2011

AMAG Pharmaceuticals - Activism may yield 32% upside

 Source : From Barron's filings : Mostly for small cap investors

AMAG Pharmaceuticals (AMAG)

Business: The development and commercialization of a therapeutic iron compound to treat anemia.
Stock-Market Value:
$296 million ($13.94/share)
What's Happening: MSMB Capital
is opposing the company's proposed merger with Allos Therapeutics (ALTH), announced a tender offer to acquire AMAG for $18.00 per share and is commencing a consent solicitation to replace a majority of the board.
Key Numbers:
the percentage of common shares owned by MSMB Capital.
the percentage of common shares owned by Adage Capital and Palo Alto Investors.
50.1%: the percentage of votes needed to approve the Allos merger.
Behind the Scenes: AMAG and Allos entered into a merger agreement that states that AMAG would acquire Allos in an all-stock deal valued at $260 million. The deal has received widespread criticism and raised strong conjectures that AMAG shareholders, including Adage Capital and Palo Alto Investors, would vote against it. Palo Alto has a history of activism when it is necessary to protect shareholder value, and Adage recently converted from a 13G filing to a 13D filing, indicating that it may not support the merger. To be consummated, the deal may need to be reworked to include a cash element. MSMB does not consider itself an activist but a "corporate raider," in that it is interested only in making money for itself, and not the other stockholders. It wants to buy the company at the best price it can. However, there is no indication that MSMB has the capital to acquire the company. While AMAG's directors have consistently received significant withhold votes in past elections, it is also doubtful that MSMB has the experience or credibility to consummate a successful consent solicitation for a majority of the board. If MSMB did win the consent solicitation, it would likely pressure the new board to remove the poison pill and sell the company to MSMB at a favorable price.

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