Dan Loeb talks up potential Amgen split

Loeb: Bullish on Amgen
Loeb: Bullish on Amgen   

Hedge fund manager Dan Loeb recommended Amgen's stock on Tuesday, causing its shares to rise about 4 percent on the news.

Loeb, head of hedge fund firm Third Point, spoke of the company at the Robin Hood Investors Conference in New York. Third Point also simultaneously sent a letter to investors discussing the position. Amgen is not a new stake; Third Point held 450,000 shares as of June 30, according to a regulatory filing. But Third Point is now "one of the company's largest shareholders," according to the letter.

"We believe the obscured fundamental value and investor skepticism that have led to Amgen's valuation discount can be easily unlocked," the letter said.

It listed three "immediate" actions Amgen could take to add value: "focusing its R&D efforts;" "providing long‐term margin guidance demonstrating a commitment to reducing a bloated cost structure" and "creating clarity on additional shareholder returns."

Daniel Loeb
Simon Dawson | Bloomberg | Getty Images
Daniel Loeb

The letter added that a more radical but viable option would be to split the company in two.

"Given the diverse nature of its assets–cash‐generative Mature Products and R&D‐intensive Growth Products–we believe that Amgen could benefit from a separation into distinct operating units with separate financial statements and should seriously consider separating into two companies (e.g., a MatureCo and a GrowthCo)," the letter said.

A spokesman for Third Point didn't immediately respond to a request for comment.

Amgen said it appreciated Loeb's comments, but did not discuss specifics.

"Amgen has always appreciated the perspectives of all of its shareholders, including Third Point, and welcomes constructive input toward our common goal of enhancing shareholder value," the company said in a statement.

The Third Point letter also said the fund is long eBay and Alibaba. It also exited its equity investment in Sony.

Third Point's Offshore fund is up 6 percent in 2014 through September. Loeb remains relatively bullish on the American economy despite market turmoil in early October.

"Going forward, we expect that the US will remain the best place to invest, credit opportunities will stay slim, and large cap opportunities with a constructivist angle will become more promising," the letter said. "Although consensus has shifted to lower growth, slower inflation, modest rates, and continued monetary expansion, we think the markets will resume an overall upward trajectory in the US through year‐end."

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Amgen issued this statement in response: "Amgen maintains an active, engaged dialogue with all shareholders. Amgen has always appreciated the perspectives of all of its shareholders, including Third Point, and welcomes constructive input toward our common goal of enhancing shareholder value."

The conference, which is closed to the press, features top investment managers and raises money for Robin Hood, a hedge fund-heavy charity that fights poverty in the New York metropolitan area.

Others to present at the event Tuesday include David Tepper of Appaloosa Management, Carl Icahn of Icahn Enterprises, Larry Robbins of Glenview Capital Management and David Einhorn of Greenlight Capital.

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