OSI issues $100 million in converts and will use up to 25% to buy back stock and enter into call spreads:
>>MELVILLE, N.Y.--(BUSINESS WIRE)--Dec. 14, 2005--OSI Pharmaceuticals, Inc. (Nasdaq: OSIP - News) today announced that it intends to offer, subject to market conditions, a new issue of $100 million of Convertible Senior Subordinated Notes due 2025. The notes will be convertible into OSI common stock at a price to be determined. The notes will be unsecured obligations of OSI and will be subordinated in right of payment to all of its existing and future senior indebtedness. As part of the offering, OSI will also grant the initial purchaser a 30-day option to purchase up to an additional aggregate $15 million of the notes.
OSI intends to use up to $25 million of the net proceeds to purchase shares of its common stock concurrently with pricing of the notes as well as to enter into call spread transactions with respect to its common stock to reduce the potential dilution from conversion of the notes, and to use the remaining funds for general corporate purposes. In connection with these call spread transactions, the initial purchaser of the notes or its affiliates have indicated that they will purchase shares of OSI's common stock in secondary market transactions and enter into various derivative transactions concurrently with, prior to and possibly after pricing of the notes.
The notes will be issued in a private placement and are expected to be resold to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended. The convertible senior subordinated notes and the shares of common stock of OSI issuable upon the conversion of the notes will not be registered under the Securities Act or any state laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.<<
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Converts, OK, but call spreads? What the hell, these guys think they're Sepracor or something? I, and most of the market, see moderate and steady growth for Tarceva. Not something that would kick butt on everything currently in the marketplace, as Sepracor's Lunesta has done (though Ambien CR and Indiplon loom). The diabetes program faces plenty of competition right on the their target, and early results make it seem as though the competition may have better guns. So do call spreads really make sense here? Goddard thinks he's an empire builder, I suppose, and others here have probably said so. We know how those stories usually turn out. And why does he pay no attention to the Solvay part of the empire, if that's the case? Usually such people watch every nickel from every corner of the kingdom, and tout how much they're worth. I mention all this because I would bet that OSI won't accept the kind of deal ABGX just did, with that kind of attitude from the CEO.
After hours, MEDX is up nicely, while OSI gave up all of today's gains and then some. Arrgh.
Cheers, Tuck |
