American Oriental Wants to Buyback $75 Million of Stock

American Oriental Bioengineering (NYSE: AOB) has authorized a program to repurchase up to $75 million worth of its own shares. These purchases could be open market buys, negotiated transactions with investors or speeded-up stock repurchases. The company will time the transactions with a view toward the price of American Oriental’s stock.

At the end of the first quarter of 2008, American Oriental had $159 million in cash and working capital of $196.5 million. AOB has 78 million shares outstanding, giving it a market capitalization of $943 million.

In July 2007, American Oriental floated an 8.5 million share secondary offering at a price of $8.60, which garnered net proceeds of $64 million. Originally, the company filed a prospectus to sell 13 million shares (both included some stock from selling shareholders including CEO Tony Liu). An article in Barron’s took a negative view of the offering, discussing a relationship between the company and an unsavory stock promoter and also a few overblown claims for some of the company’s products. Although the case was built on innuendo, the attack took about 12% out of the price of AOB’s stock, sending it to a level of $8.60, and the size of the offering was cut almost in half. Tony Liu offered only 500,000 shares instead of his originally intended 2 million shares.

Now, the company comes back with a desire to buy as much as $75 million of stock when its shares are trading for $12.10. This price is a 20 cent increase following the repurchase announcement.

American Oriental made its debut as a public company through a reverse merger. It migrated to the American Exchange in June 2005 and then moved to the New York exchange in December 2006.

As we reported last week, American Oriental has put $16 million down toward the acquisition of rival China biopharma companies. The prepayments are refundable if the deals are not completed, and AOB did not give any details on the companies being considered or the type of business they pursue.

AOB’s recent acquisitions of CCXA and Boke are working out well. The company also paid $18 million to buy a 37% stake in China Aoxing (CAXG.OB), which makes generic version of western-style narcotic pain drugs. China is very restrictive in giving out licenses for narcotic drug companies. As a result, to participate in China Aoxing’s business, AOB departed from its plant-based drug emphasis and its usual practice of acquiring other companies entirely.

Disclosure: none.

Comments

[spaceartist:]

Hmmm. AOB announces a $75 million buyback on Monday. On Tuesday, they announce that they want to sell $125 million in notes convertible to common stock. Why not simply sell $50 million in convertible notes and use the $75 million for purchases?

2008 Jun 03 06:19 PM