Onyx Sued by Investors Claiming Amgen Buyout Is Too Cheap

Onyx Pharmaceuticals Inc. (ONXX) was sued by investors claiming the company is undervalued in a $10.4 billion acquisition by Amgen Inc. (AMGN) that’s “infected” by conflicts of interest.

The transaction is “infected by numerous conflicts of interest which hamstring the ability” of Onyx directors from “fulfilling their fiduciary obligations to the company’s shareholders,” according to the complaint filed in state court in Redwood City, California.

Amgen, the world’s largest biotechnology company by sales, said in an Aug. 25 statement that the acquisition will be financed using $8.1 billion in bank loans and cash the company has in the U.S.

Onyx directors served on the board of a “de facto Amgen subsidiary” or relied on Thousand Oaks, California-based Amgen for the funding of their organizations, and the transaction is also tainted by relationships between Onyx Chief Executive Officer N. Anthony Coles and members of Amgen’s board, according to the complaint.

The merger agreement contains provisions benefiting Amgen that discourage third parties from submitting superior offers, to the detriment of Onyx’s shareholders, according to the Sept. 3 complaint.

Danielle Bertrand, a spokeswoman for Onyx, declined to comment on the complaint.

Amgen said it’s buying South San Francisco, California-based Onyx for $125 a share. The transaction was approved by both boards and is expected to close in the fourth quarter.

The case is Louisiana Municipal Police Employee’s Retirement System v. Amgen Inc., CIV-523882, California Superior Court, San Mateo County (Redwood City).

To contact the reporter on this story: Joel Rosenblatt in San Jose, California, at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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