Tags: Third | Point | Hedge | Amgen

Third Point Hedge Fund Presses Amgen to Break Up

Tuesday, 21 October 2014 06:08 PM

Third Point LLC, the hedge-fund firm run by Daniel Loeb, called for a breakup of biotechnology company Amgen Inc. and sold its investment in Sony Corp., trading one public activist campaign for another during the third quarter.

The New York-based firm wants Amgen to split into a “MatureCo and GrowthCo” — one with older drugs and one with new prospects — according to a letter to investors released Tuesdayday. Third Point has added to its Amgen stake, making it one of the company’s largest shareholders, according to the letter.

Amgen shares rose 4.8 percent to $144.09 in New York.

U.S. companies are increasingly turning to breakups, often under pressure from activist investors, as they look for ways to boost shareholder returns. Drugmakers such as Sanofi and Merck & Co. may sell their portfolios of mature drugs, which can still command a premium in emerging markets even as they face competition from generic alternatives.

“Amgen has all the hallmarks of a hidden value situation,” Third Point wrote in the letter dated Tuesday and posted on its website. “The company does not receive proper credit from investors for either the cash-generative potential of its mature products or the coming financial impact of its growth assets.”

Mature Drugs

The number of U.S. companies — from BHP Billiton Ltd. to EBay Inc. — that have announced plans to spin off business units to shareholders this year is on pace for a record, data compiled by Bloomberg show.

“This is a company that has two very distinct product porfolios: a group of legacy products that has been around since the 1990s and a group of relatively new products that has tremendous growth potential,” said Geoffrey Porges, an analyst at Sanford C. Bernstein & Co. who has previously suggested that Amgen split up. “These are two very different asset classes in the company.”

Third Point also bought new stakes in EBay and Alibaba Group Holding Ltd. in the three months ended Sept. 30.

Sony’s American depositary receipts fell less than one percent to $17.43 Tuesday, while Alibaba climbed 3 percent to $90.90, and EBay gained 3.4 percent to $50.86.

“Amgen has always appreciated the perspectives of all of its shareholders, including Third Point,” Trish Hawkins, a spokeswoman, said in an e-mail. “We look forward to further updating our shareholders on Amgen’s strategic priorities” at the company’s Oct. 28 meeting with analysts, she said.

The maker of arthritis drug Enbrel said in July it was cutting more than 2,400 jobs through 2014, and would close plants in two states in the first step of a multi-stage restructuring.

Sony Exit

Third Point said it made “nearly 20 percent” on its exited Sony investment, which was announced in May 2013, despite the Japanese company rejecting Loeb’s push that it spin out about one-fifth of its U.S.-based entertainment business.

“While, regrettably, the company rejected our partial spin-out suggestion, they made some changes that were consistent with our goals,” Loeb wrote. “They have a long way to go and we continue to believe that more urgency will be necessary to definitively turn around the company’s fortunes.”

Sony CEO Kazuo Hirai has been working to turn around the company by focusing on entertainment and game content, consoles and mobile devices as demand for electronics such as TVs has dropped. The company has cut jobs and restructured to make TV manufacturing a separate unit.

Sony’s shares have been hit in recent weeks by widening losses at the consumer-electronics maker as the company took a 180 billion-yen writedown last month against its smartphone business.

EBay, Alibaba

While most of Third Point’s investments aren’t based on an activist strategy — where the fund seeks to force management and boards to make changes that boost shareholder returns — it’s those campaigns that attract the most attention. Loeb last year also targeted companies including Dow Chemical, CF Industries Holdings Inc. and Sotheby’s.

Third Point representatives were impressed with EBay Chief Executive Officer John Donahoe after a meeting with him this summer. EBay “had arrived at a critical inflection point and gained new focus,” Third Point said.

Third Point said it has also met with management of Alibaba and bought a “significant direct investment” in the company that went public last month.

“We see continued end-market growth in Chinese consumer spending and e-commerce (as well as global e-commerce) and continue to believe that Alibaba has considerable additional monetization potential,” Third Point said.

Loeb, who runs the $17.5 billion firm, separately spoke Tuesday at the Robin Hood Investors Conference in New York. The event doesn’t allow media.

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Third Point LLC, the hedge-fund firm run by Daniel Loeb, called for a breakup of biotechnology company Amgen Inc. and sold its investment in Sony Corp., trading one public activist campaign for another during the third quarter.
Third, Point, Hedge, Amgen
Tuesday, 21 October 2014 06:08 PM
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