Incyte Announces Final Results of Tender Offer
Incyte (Nasdaq: INCY) announced the final results of its Dutch auction tender offer, concluding on June 10, 2024. The company aimed to buy up to $1.672 billion in shares at $60.00 per share. A total of 29,821,563 shares were tendered, and Incyte accepted 27,866,666 shares, representing 12.4% of its total outstanding shares. Additionally, Incyte entered into a stock purchase agreement with Baker Entities to buy 5,459,183 shares at the same price, totaling $328 million. Overall, the company will repurchase 33,325,849 shares for approximately $2.0 billion, representing 14.8% of its outstanding shares.
- Incyte successfully completed a $1.672 billion tender offer, purchasing 27,866,666 shares.
- The repurchased shares represent 12.4% of Incyte's outstanding shares, potentially increasing shareholder value.
- A separate stock purchase agreement ensures Baker Entities maintain their ownership percentage, showing strong insider confidence.
- Incyte will repurchase 33,325,849 shares in total, representing 14.8% of the outstanding shares, a significant reduction in share count.
- The tender offer's total cost of $2.0 billion excludes fees and expenses, potentially impacting Incyte's financials.
- The final proration factor was 93.5%, indicating not all tendered shares were accepted, which may disappoint some shareholders.
- Significant expenditure on share repurchases may limit funds available for other investments or operations.
Insights
Incyte's tender offer to purchase approximately $1.672 billion worth of its common stock is a significant event, marking a substantial reduction in the number of outstanding shares. This move will likely increase earnings per share (EPS) as the same amount of earnings will be spread over fewer shares, which may lead to a rise in the stock price in the short term.
However, investors should be cautious about the long-term impact. The company is using a large amount of cash reserves (or potentially increasing its debt) to buy back shares. This may limit liquidity and financial flexibility in the future, which could affect Incyte's ability to invest in growth opportunities or weather economic downturns.
The involvement of Julian and Felix Baker, significant stakeholders, in the repurchase agreement is also noteworthy. Their agreement to maintain their proportional ownership indicates a strong vote of confidence in the company's future prospects. This could be seen as a positive signal for retail investors, suggesting that key insiders believe in the sustained growth and profitability of the company.
In terms of the buyback mechanism, the use of a modified Dutch auction allowed shareholders to specify the minimum price they were willing to accept, ensuring that Incyte did not overpay for the shares. This method is generally considered fair and efficient, potentially resulting in a better outcome for the company and its shareholders.
Investors should also consider the broader market conditions. Given the current market volatility, such significant buybacks may signal management's belief that the stock is undervalued, presenting a potentially lucrative entry point.
Market sentiment around share repurchase programs often leans positive, as they are typically seen as an indicator of management's confidence in the company's future performance. This can naturally lead to an increase in investor confidence and potentially drive up the share price in the short term. However, the long-term impact of such a significant buyback must be assessed in the context of the company's overall strategy and market conditions.
Incyte's repurchase of
However, retail investors should also consider the opportunity cost associated with this buyback. While the immediate effect might be an uptick in stock prices, the reduction in cash reserves or increased leverage could potentially impact the company’s ability to invest in research and development or pursue strategic acquisitions, which are important in the biotech sector.
Furthermore, the timing of the buyback is key. With the biotech industry facing unique challenges and opportunities, such as evolving regulations and rapid technological advancements, the allocation of funds to buy back shares rather than reinvest in core operations might be a double-edged sword. Retail investors should weigh these factors when considering their positions in Incyte.
Based on the final count by Computershare Trust Company, N.A., the depositary for the tender offer, a total of 29,821,563 shares of Incyte’s common stock were properly tendered and not properly withdrawn at or below the purchase price of
Incyte has accepted for purchase 27,866,666 shares of its common stock at a purchase price of
As previously announced, on May 12, 2024, Incyte entered into a separate stock purchase agreement with Julian C. Baker (a member of Incyte’s Board of Directors), Felix J. Baker, and entities affiliated with Julian C. and Felix J. Baker, including funds advised by Baker Bros. Advisors LP (collectively, the “Baker Entities”), under which the Baker Entities agreed not to tender or sell any shares in the tender offer and instead agreed to sell to the Company, following completion of the tender offer, a pro rata number of shares at the same price per share as will be paid by the Company in the tender offer, such that the Baker Entities’ aggregate percentage ownership in the Company will be substantially the same as prior to the tender offer. The closing of the purchase under the stock purchase agreement is subject to customary conditions and is expected to occur on June 26, 2024, the eleventh business day following the expiration date of the tender offer, or on such later date as the parties shall mutually agree. Based on the 27,866,666 shares the Company accepted for purchase in the tender offer, the Company expects to purchase 5,459,183 shares from the Baker Entities under the stock purchase agreement at a purchase price of
The dealer manager for the tender offer was Goldman Sachs & Co. LLC. D.F. King & Co., Inc. served as information agent for the tender offer. Stockholders who have questions or would like additional information about the tender offer may contact D.F. King & Co., Inc. toll-free at (866) 864-4943.
About Incyte
A global biopharmaceutical company on a mission to Solve On., Incyte follows the science to find solutions for patients with unmet medical needs. Through the discovery, development, and commercialization of proprietary therapeutics, Incyte has established a portfolio of first-in-class medicines for patients and a strong pipeline of products in Oncology and Inflammation & Autoimmunity. Headquartered in
Forward-Looking Statements
Except for the historical information set forth herein, the matters set forth in this release contain predictions, estimates and other forward-looking statements, including statements regarding the expected consummation of the stock purchase from the Baker Entities and the expected total number of shares to be purchased through the tender offer and stock purchase agreement and the total cost of those shares.
These forward-looking statements are based on Incyte’s current expectations and subject to risks and uncertainties that may cause actual results to differ materially, including risks related to the satisfaction of closing conditions under the stock purchase agreement, developments or changes in economic or market conditions; developments or changes in the securities markets, developments or changes in the Company’s business, financial condition or cash flows, and other risks detailed in Incyte’s reports filed with the Securities and Exchange Commission, including its quarterly report on Form 10-Q for the quarter ended March 31, 2024. Incyte disclaims any intent or obligation to update these forward-looking statements.
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Source: Incyte Corporation
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