Actavis to Buy Allergan for $66 Billion
Actavis have struck a deal with Allergan thought to be in the region of $66 billion, this comes after Allergan who are well known for manufacturing botox turned to Actavis to repel a hostile takeover attempt from Valeant Pharmaceuticals.
Actavis are going to pay $219 a share, this was announced in a statement earlier this afternoon. This price is 10% higher than the price that was quoted at the end of last week and in cash terms significantly higher than Valeant’s bid.
With this deal Allergan will be able to provide its shareholders with an alternative to Valeant, who are said to be willing to pay $200 a share, but Valeant also has the backing of Allergan’s largest shareholder – Bill Ackman’s Pershing Square Capital Management.
Part of Valeant’s promise to increase its bid to at least $200 a share depended on an anticipated increase in its stock price, the company said in a letter to Allergan’s board last month.
In resisting Valeant, Allergan has described its offer as “grossly inadequate” and argued the Canadian company will gut its research and development budget and use its cash flow to pay down debt accumulated from previous acquisitions.
Allergan have been trying to strike a deal with an alternative company before an investor meeting on December 18. That’s when shareholders will vote on Valeant and Ackman’s proposal to remove Allergan directors, with a plan to eventually replace them with those who are more amenable to Valeant’s offer.
Allergan’s share price closed on the 14th at $198, while Actavis closed at $243.77. This creates a total market value of about $65 billion.
So what next for Valeant? Well they probably have enough resources at a stretch to raise their offer to $210 a share however this is very unlikely as it would leave the company with more debt than its managers would like.
Actavis are a generic drug and products maker have produced treatments like the Alzheimer’s treatment Namneda, first approached Allergan back in August about apossible takeover deal, but talks have only just recently restarted.Actavis is run from Parsippany, New Jersey, and incorporated in Dublin.
Bill Ackman acquired around 9.7 percent of Aleergan, but this was mostly in stock options. He paid around $3.22 billion. With this news in the knowledge a price of $215 a share would mean Ackman’s stake in the business is worth more than $6 billion.
Valeant, too, would be rewarded even as the losing bidder: the Canadian company is due 15 percent of Pershing Square’s net profits if it loses the bid for Allergan to another company. Valeant set the low end of the bidding at about $200 a share when the company said on Oct. 27 that it is willing to bump its cash and stock offer, which is currently valued at about $180 a share.
It has said it’s seeking to buy Allergan to expand its portfolio and become one of the world’s largest drugmakers. Pershing Square acquired its Allergan stake after learning of Valeant’s intention to make a bid, and Allergan has accused Ackman of violating insider-trading rules.
It unsuccessfully sued to stop him from voting his shares in the Dec. 18 meeting. Ackman has said that he welcomes a review by the Securities and Exchange Commission of Pershing Square’s tactics and that it did nothing wrong — acting as a co-buyer, alongside Valeant.
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