New York Hedge Fund Makes $378 Million Bid for Amag in Attempt to Block Poorly Received Merger

8/3/11Follow @arleneweintraub

Shares of Lexington, MA-based Amag Pharmaceuticals (NASDAQ: AMAG) are up 10 percent today to $15.77 on news of an unsolicited takeover offer from New York-based hedge fund MSMB Capital Management. The hedge fund is offering $18 a share to acquire Amag, which markets a drug to treat iron-deficiency anemia.

The bid comes in the wake of Amag’s proposed merger with Allos Therapeutics (NASDAQ: ALTH), a Colorado company that makes a treatment for T-cell lymphoma. Amag, a one-product company with nothing in the pipeline, had been looking for acquisitions to round out its product offerings. Amag said on July 20 that the proposed $686 million merger with Allos would help both companies achieve cost synergies. But Wall Street wasn’t impressed: Amag’s shares dropped from nearly $19 before the Allos announcement to $14.39 yesterday. The offer from MSMB represents about a 25 percent premium above yesterday’s closing price.

The hedge fund says it is proposing the acquisition to protect Amag shareholders from what’s perceived to be a less attractive deal with Allos, according to a letter MSMB sent to Amag. “We do not understand the company’s motivation in entering into a business combination transaction that does not provide stockholders with a premium or a liquidity alternative,” writes MSMB’s Martin Shkreli. “Given the clear superiority of our offer to the proposed Allos transaction, we would like to meet with you and your advisors as soon as possible to finalize a definitive agreement.”

Amag responded with a brief statement saying its board will consider the offer. But MSMB is clearly in a hurry to see the deal done. “It is imperative that [Amag] be sold now, the transaction with Allos terminated and further erosion of stockholder value be prevented,” MSMB’s letter says.

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