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Chief financial engineer

4 Sep 2013 By Rob Cox

An investment banker as CEO may have some merits – at least Amgen shareholders should think so. The $84 billion biotech led by former Morgan Stanley merger specialist Bob Bradway last week made mincemeat out of the value arguments put up by its quarry, Onyx Pharmaceuticals, and its advisers at Centerview Partners.

Regulatory filings this week paint a picture of an unusually spirited back-and-forth between Amgen and Onyx, culminating in an agreed takeover at a $10.4 billion price that fell well short of what was initially expected.

Hostilities commenced in public at the end of June, when Onyx told shareholders it had rejected an unsolicited offer from Amgen at $120 a share. In line with the M&A playbook, Onyx huffed that the offer “significantly undervalued” the company and that it could do better by opening up its dance card.

Investors and analysts agreed. Onyx’s shares rose above $136. Sanford Bernstein analysts saw the purchase price going as high as $150. But in the end, Bradway clinched Onyx’s agreement to the deal at just $125 a share, a relative bargain for Amgen’s shareholders.

The bidding war never happened. After Onyx rejected the first offer, Amgen’s investment banker-turned-CEO went on the offensive. He requested access to non-public information as a precursor to potentially raising his bid. By the end of July, Bradway was ready to pay $130 a share.

Onyx boss Anthony Coles tried to hold out for more, but the delay proved costly. A committee examining the results of a study of Onyx’s blood-cancer treatment Kyprolis said it needed more time to approve the drug’s use in Europe. The news wasn’t deemed material enough for Onyx to publicize it separately. But it was all Bradway needed to press harder.

As other bidders fell away, he pressed for Onyx to “unblind” or disgorge further details of the study. Not surprisingly, Onyx declined, but this gave Bradway an excuse to drop his price to $121. The parties eventually settled on $125 per share, just 4 percent above the opening offer Onyx had rejected.

Amgen’s shares, meanwhile, rallied from around $98 when the offer was made public to $111 today. That’s a gain of about $9 billion, roughly equal to Onyx’s value. Having a Wall Streeter at the helm may not help a company cure cancer, but it can work out well when it’s negotiating prowess that matters.


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