Valeant teams up with hedge fund to buy Botox maker Allergan for $42 bn

Activist investor William Ackman and Valeant Pharmaceuticals International Inc plan to table a hostile $42-billion cash and stock bid for wrinkle treatment's maker Allergan Inc, according to a yesterday filing with the US Securities and Exchange Commission.

News of the impending bid sent the stock price of both companies soaring in after-hours trading, with Allergan up as much as 21 per cent and Valeant by 10 per cent.

Allergan stock closed yesterday at $142, giving it a market value of about $43 billion.

Ackman and his $13-billion hedge fund, Pershing Square Capital Management LP, which has recently spent around $4 billion in amassing a 9.7-per cent stake in Allergan, has teamed up with Canadian pharmaceutical company Valeant and plan to buy Allergan for $15 billion in cash and the rest in stock.

Both said that they have lined up Barclays and Royal Bank of Canada for financing the deal.

California-based Allergan said in a statement that its board would evaluate any offer or proposal put forward by Valeant and Pershing Square, and that it "has had no discussions with either Valeant or Pershing Square with respect to this matter."

It also added that neither Valeant nor Pershing Square has sent a merger proposal.

Valeant and Pershing Square have until 2 May to table the offer, the filing said.

Allergan, the maker of anti-wrinkle treatment drug Botox is a global specialty pharmaceutical company whose product ranges includes ophthalmic pharmaceutical, dermatology and neurological products.

Botox generated about $2 billion of Allergan's total 2013 revenue of $6.3 billion, its dry-eye drug Restasis generated about $940 million, its breast-implant business $378 million and $100 million through Latisse, its prescription drug that increases the length of eyelashes.

Allergan, which spends about 17 per cent or about $1 billion a year of its revenue on research and development of new drugs, has 11,400 employees and manufacturing plants in Texas, Ireland, and Costa Rica.

Valeant, Canada's biggest drug maker and one of the most aggressive acquirers, is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products, primarily in the areas of dermatology, eye health, neurology, and branded generics.

Valeant has a product portfolio of about 490 products, and has two drugs in the top 200 drugs by sales in the US. Its main markets are in the US, Canada, Mexico, Brazil, Europe and Australia.

The company, which has a market cap of C$50.6 billion and annual revenues of $5.8 billion, has made over 60 acquisitions since 2008. 

Last year it acquired US medical device systems maker Solta Medical, for $250 million in order to create a global leader in skin-care sector, and acquired leading global eye health company Bausch + Lomb for $8.7 billion.

Its other recent acquisitions include the $344-million buy of California-based skin-care product maker Obagi Medical Products and the purchase of Natur Produkt International, a Russian specialty pharma company for approximately $163 million.

It also acquired Arizona-based medical cosmetics company Medicis Pharmaceutical for about $2.6-billion.

Last year, Valeant backed out from bidding for Serbia's Galenika Pharmaceuticals, and also gave up plans of acquiring US generic drug giant Actavis for $13 billion. Its $5.7 billion hostile bid for Cephalon in 2011 was rejected.

A successful Allergan deal would more than double the size of Valeant and become one of the largest pharmaceutical companies in the world, in line with Valeant's CEO, whose aim is to make the company into one of the five largest pharmaceutical firms by market value by the end of 2016.

''We firmly believe that combining Valeant and Allergan would create an unrivaled platform for growth and value creation in health care,'' Valeant said in a statement. ''And we look forward to finalizing and announcing the terms of our proposal shortly.''