Astellas acquires OSIP

May 17, 2010

Astellas agrees to acquire OSI Pharmaceuticals (OSIP) for $57.5 in a tender offer scheduled to close 6/4/2010.

The OSIP 3% converts has an interesting take out matrix because there is an incremental share factor involved.

Make whole language

Conversion rate = base conversion rate + ((57.7 – base conversion price)/57.5 times incremental share factor)

Where base conversion rate = 13.5463

Base conversion price = 73.82

Incremental share factor = 7.4505

Where the second part of the equation is 0 if the calculation is a negative number. At the current price, the conversion ratio equals 13.5463. However, in a fundamental change make whole, the base conversion rate is increased by 5.44 shares (make whole shares) to become 18.9863.

The base conversion price is now 52.67 (1000/18.9863)

The incremental share factor is now 10.43 (7.4505 *1.40)

The new conversion rate is 19.86

Parity (with takeout at $57.5) is 114.2

Conversion on make whole

Fundamental change date = 6/4/10 (estimated). The company has declare a fundamental change purchase date that is at least 30 business days after the takeout date.

Holders can convert any day between the fundamental change date and the fundamental change purchase date.

As long as we convert after the record date of 7/1/10, we will get the next coupon. We should be able to do that according to this timeline.


July 17, 2010

As previously announced he Company has made an Offer to Purchase its 3% Convertible Senior Subordinated Notes due 2038 (the “3% Notes”) pursuant to an Offer to Purchase dated June 17, 2010 as amended and supplemented (the “Offer to Purchase”). Each holder of a 3% Note has a right (the “Purchase Right”) to require the Company to purchase all or part of the holder’s 3% Notes as a result of a Fundamental Change. As explained in the Offer to Purchase, three Fundamental Changes have occurred.

One Fundamental Change occurred on June 3, 2010 as a result of the acquisition by Astellas Pharma Inc. of beneficial ownership of more than 50% of the Company’s common stock (the “Change of Control”).

A second Fundamental Change occurred on June 8, 2010 as a result of the merger of the Company with an indirect subsidiary of Astellas Pharma Inc. (the “Merger”). A third Fundamental Change occurred on June 18, 2010 as a result of the delisting of the Company’s common stock from the NASDAQ Global Select Market (the “Delisting”). The Company has amended its Offer to Purchase the 3% Notes so that the Expiration Time of the Purchase Right is July 30, 2010, regardless whether the Purchase Right arises as a result of the Change of Control, the Merger or the Delisting. For each $1,000 principal amount of 3% Notes validly tendered pursuant to the Purchase Right and not validly withdrawn on or prior to July 30, 2010, the Company will pay, in cash, the purchase price of $1,000 plus accrued and unpaid interest to, but excluding, August 2, 2010. Such payment will be made on August 2, 2010.

To exercise their Purchase Right as a result of the Change of Control, Merger or the Delisting, holders must surrender their 3% Notes for purchase to the paying agent at any time on or before July 30, 2010 and follow the applicable procedures, as described in the Indenture and in the Second Amended and Restated Fundamental Change Purchase Notice distributed to the holders of the 3% Notes and published on the Company’s web site.


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