Proposed Acquisition of Allergan by Ackman and Valeant Pharmaceuticals

2014-04-24
Published : Apr-2014

On Tuesday, Canadian company Valeant Pharmaceuticals International Inc said that the company and activist investor Bill Ackman made a takeover bid of $47 billion to acquire Allergan Inc – the maker of Botox. This bid comes at a time when Valeant Pharmaceuticals International seeks to become one of the world’s five largest drug companies.

If successful, this offer would bring together two mid-sized pharmaceutical companies with expertise in eye care and skin care products. The deal is highly unusual as activist investors normally acquire stakes and then agitate for strategic changes.

Allergan’s largest shareholder, Pershing Square Capital Management which belongs to Ackman has a 9.7 percent stake in the company. It disclosed in a filing that it is supporting the bid.

In a statement, Allergan said that it has received the offer and it will carefully consider the proposal and pursue the course of action which it believes is in the best interests of the company’s stockholders. Allergan Inc has also adopted a stockholder rights plan effective on April 22 that will allow existing shareholders to buy Allergan stocks at a steep discount if a single investor or group buys 10 percent or more of its shares.

Valeant offered to pay $48.30 per share in cash. And for each Allergan share, Valeant offered to pay 0.83 of its common share.

Since 2010, Valeant has been on an acquiring spree and in 2013, it purchased Bausch & Lomb Holdings, contact lens maker for $8.7 billion. Michael Pearson, Chief Executive Officer of Valeant Pharmaceuticals International said in January, that the company’s goal is to become one of the world’s top five pharmaceutical companies by the end of 2016.

Pearson stated that David Pyott, Allergan Chief Executive Officer and the company’s board were unwilling to discuss a merger with Valeant. Valeant said that it would have preferred to negotiate a deal privately.

Allergan which has a lucrative portfolio of ophthalmic drugs to treat conditions such as dry eyes and glaucoma is larger by revenue, reporting $6.3 billion sales in 2013.  In 2013, Valeant reported $5.8 billion in revenue.

In New York, Allergan’s shares increased from 15.2 percent to $163.65. Valeant shares increased 7.5 percent to $135.41.

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