Amgen $4 bln convertibles: 5-year talked at 0.125%-0.625%, 7-year at 0.375%-0.875%, both up 10-13%

By Kenneth Lim

Boston, Feb. 13 - Amgen Inc. plans to price two $2 billion tranches of convertibles on Tuesday after the market closes, with talk guiding for coupons of 0.125%-0.625% in the five-year piece and 0.375%-0.875% in the seven-year tranche, and initial conversion premiums of 10%-13% for both, market sources said.

The senior notes, which will be priced at par, will be non-callable for life.

The bonds are convertible if the stock price exceeds 130% of the conversion price and are freely convertible one month before maturity. Settlement of the principal amount will be in cash.

Morgan Stanley, Merrill Lynch, Citigroup, JP Morgan and Lehman brothers are the bookrunners.

A greenshoe option of $300 million for each tranche is also planned.

Thousand Oaks, Calif.-based Amgen, the world's largest biotechnology company, plans to use about $3 billion of the proceeds to repurchase shares. The remaining proceeds will be used to fund the convertible hedges, working capital and general corporate purchases.

The securities are protected from takeovers through a make-whole premium and a change-of-control put option.

Amgen also plans to enter into convertible-note hedge and warrant transactions to increase the effective premium to 50%.

Moody's Investors Service will rate the notes A2, while Standard and Poor's will rate them A+.

The convertibles will be distributed under Rule 144A.

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