MedImmune surges on buyout; Bausch & Lomb climbs on rumors; AMD, Charming Shoppes launch deals

By Kenneth Lim

Boston, April 23 - MedImmune Inc. skyrocketed on Monday after the company agreed to be bought by AstraZeneca plc, leading the convertible market as takeover-related news kept investors busy.

Bausch & Lomb Inc. also surged on unconfirmed rumors that the company could be a takeout target.

Meanwhile, Advanced Micro Devices Inc. launched a $1.8 billion overnight convertible offering that is expected to price with a 100% initial conversion premium.

Charming Shoppes Inc. also plans to price $250 million of convertibles Tuesday after the market closes.

MedImmune gains on buyout

MedImmune convertibles shot up on Monday after the company agreed to a $15.6 billion all-cash offer from AstraZeneca.

The MedImmune 1.375% convertible due 2011 rose about 15 points outright to trade at 174.75 against a stock price of $56.60, while the 1.625% convertible due 2013 was 13 points higher outright at 177.75 against the same stock price. MedImmune stock (Nasdaq: MEDI) jumped 17.83% or $8.56 to close at $56.57.

London's AstraZeneca on Monday said it will pay $58 per share for MedImmune, a 21% premium to MedImmune's closing price on Friday. The offer is expected to close in June and will be financed through a committed banking facility. MedImmune may have to pay $450 million if the planned merger is terminated.

Gaithersburg, Md.-based MedImmune, a biotech company, said a fortnight ago that it was exploring strategic options to boost shareholder value.

"The MedImmunes are all better," a sellside convertible trader said. "This is pretty sweet for the guys who bought these last year."

A convertible analyst said MedImmune could receive a competing bid, but otherwise shareholders will likely accept the current offer.

"With that kind of premium you'd think shareholders would not turn it down," the analyst said.

While outright investors did well, hedge returns will depend on the hedge position and the eventual make-whole amount. The MedImmune convertibles could return about an additional share, depending on whether and when the deal takes effect.

"They have takeover protection, and it looks like it will depend on how you were hedged," the analyst said. "It's a matter of how much premium you're going to lose."

But a buysider said most hedge investors will probably emerge with some gains.

"I think most guys did OK," the buysider said. "I don't think anyone should have been on a very heavy hedge, and the make-whole should be just enough. I don't think today's news should be that big of a surprise for anybody especially after they said two weeks ago that they're trying to improve shareholder value. And the convertibles have been in the money for so long. You'll make money if you convert them."

Bausch & Lomb gets rumor boost

Bausch & Lomb's floating-rate convertible due 2023 improved about 5 points outright as the stock climbed on unconfirmed speculation that the company could be a takeover target.

The convertible was marked at 120 bid, 120.5 offered against a stock price of $60.60 on Monday. Bausch & Lomb stock (NYSE: BOL) closed at $61.93, up by 12.76% or $7.01.

"I heard about the rumors, but I don't know if it's true," a sellsider said. "I don't think it's expected, but with all the M&A news today people are probably giving this a little more weight."

Bausch & Lomb, a Rochester, N.Y.-based maker of eye care products, did not comment on the rumors.

A convertible analyst said there was no fundamental news to explain the increase in the stock's price, but one possible acquirer mentioned in the rumors was Pfizer Inc. Although Pfizer has been on the acquisition trail, the analyst said it is not apparent whether the biotech would be interested in Bausch & Lomb.

"They [Pfizer] have made it pretty clear that they plan on doing takeovers, but Bausch & Lomb is not a biotech at all," the analyst said. "I don't know what they'd be thinking if they were interested."

Pfizer could not be reached for comment.

The analyst said the convertibles have takeover protection, but there is no telling at the moment whether any of that will matter.

"They are takeover protected, they have a matrix, but it will really depend what the deal is and there's no deal now," the analyst said.

A buyside convertible trader said Bausch & Lomb could be a potential takeover target, but there was no indication of any deal at the moment.

"Their stock's definitely come down from a year or two ago, so I could see that someone might think there's some value here," the buysider said. "But I haven't heard anything and all I see right now is a lot of speculation and not a lot of confirmation."

Advanced Micro launched overnighter

Advanced Micro Devices said late Monday that it plans to price $1.8 billion of eight-year convertible senior notes in an overnight offering talked at a coupon of 5.75% to 6% and an initial conversion premium of 100%.

The convertibles are offered at par and will price Tuesday before the market opens. Advanced Micro stock (NYSE: AMD) closed at $14.04 on Tuesday, lower by 0.85% or 12 cents, which would place the expected initial conversion price at $18.08. The common stock slipped 2.49% or 35 cents in after-hours trading to settle at $13.69 after the deal was announced.

There is an over-allotment option for an additional $400 million.

Morgan Stanley is the bookrunner of the Rule 144A offering.

Advanced Micro, a Sunnyvale, Calif.-based maker of computer processor chips, said it will use the proceeds of the deal to fund capped call transactions that are expected to have a capped price at a 200% premium to its stock price. At least $500 million of the proceeds will be used to repay part of a term loan from Morgan Stanley Senior Funding incurred in Advanced Micro's acquisition of ATI Technologies Inc. The remainder of the proceeds will be used for general corporate purposes.

Charming Shoppes plans deal

Charming Shoppes' planned $250 million offering of seven-year convertible senior notes is slated to price Tuesday after the market closes, talked at a coupon of 1% to 1.5% and an initial conversion premium of 20% and 25%.

The convertibles will be offered at par.

There is an over-allotment option for a further $25 million.

JP Morgan and Banc of America are the bookrunners of the Rule 144A offering.

Charming Shoppes, a Bensalem, Pa.-based retailer of women's plus-size apparel, said it will use the proceeds of the deal to fund a call of its $150 million outstanding 4.75% convertible senior notes due 2012 and for general purposes.

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