AbbVie Inc. (ABBV, Financial) launched a tender offer for the acquisition of $7.5 billion of its common stock, and the share price had a 5.72% jump to $102.7 per share on the New York Stock Exchange.
The pharmaceutical company, which originated in 2013 as a spin-off of Abbott Labs (ABT), informed the market that the tender offer is part of a "Dutch auction." That is, the deal is made in favor of the shareholder who, in competition, offers the most advantageous price for AbbVie in a per share range of $99.00 to $114.00. The investors will be paid cash and the tenders will be satisfied until AbbVie has completed the repurchase process. Within that price range, the shareholder of AbbVie can tender all his shares or just a portion of the holding.
Unless extended, AbbVie stockholders have no later than May 29 to tender their shares.
The announcement was made by AbbVie on its website on May 1.
At an average price of $106.50 per share, AbbVie will likely repurchase approximately 70.4 million shares of its total outstanding of 1.59 billion shares. According to GuruFocus, 72.65% of the common stock is held by institutions and 0.09% by insiders. It is currently worth $161.95 billion.
Compared to past performance of AbbVie on the stock market, the average price of $106.50 per share represents 12% growth from the average of a $64.61 to $125.86 per-share 52-week range. But it is nearly 9% from the average price that analysts are targeting for the following 52 weeks of trading.
The target price of $115.90 is a mean of 21 estimates ranging from $81 to $157 per share.
AbbVie’s $7.5 billion self-tender offer is part of the company’s program to repurchase its own stock for a total amount of $10 billion.
The pharmaceutical company will use its liquidity available on hand and short-term securities. As of March 30, it is about $9.55 billion. AbbVie feeds up its liquidity with a cash flow that is at a $10 billion annual pace from operations. Approximately 64% of that is dispersed by AbbVie to its shareholders through the payment of a 96-cent cash quarterly dividend per share. The payment is according to a 78% payout ratio. AbbVie has a forward dividend and yield of $3.84 and 3.98%. The next dividend will be paid on May 15 to stockholders of record as of April 13.
AbbVie has also a base of lenders to be satisfied on approximately $37.4 billion total debt outstanding. Net of that, 5.3% of the company’s free-levered cash flow is invested by AbbVie for business growth purposes, advancing a portfolio of products that sees in Humira, a medication used to treat rheumatoid and psoriatic arthritis, covering 60% of total revenues. Humira is therefore the company’s flagship product. Â
So far this year, AbbVie has climbed 4% and is up trending again from early April levels.
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Disclosure: I have no positions in any stock mentioned in this article.
