Valeant tables hostile $45.7 bn bid for Botox maker Allergan
23 Apr 2014
Valeant Pharmaceuticals International Inc, Canada's biggest drug maker and one of the most aggressive acquirers, yesterday tabled a hostile $45.7-billion cash and stock bid for Botox maker Allergan Inc.
The offer immediately sparked a poison pill defence from Allergan, which adopted a one-year stockholder rights plan effective 22 April and declared a dividend distribution of one preferred share purchase right on each outstanding share.
The California-based company said that the poison pill defence ''is not intended to prevent an acquisition of the company on terms that the board considers favourable to, and in the best interests of, all stockholders, rather, it aims to provide the board with adequate time to fully assess any proposal.''
Valeant had on late Monday informed the US Securities and Exchange Commission that it has teamed up with activist investor William Ackman and planned to table cash and stock bid for Allergan. (See: Valeant teams up with hedge fund to buy Botox maker Allergan for $42 bn)
News of the impending bid sent the stock price of both companies soaring in after-hours trading, with Allergan up 21 per cent and Valeant by 10 per cent. In fact, just the revelation of the detailed bid sent Allergan share price soaring by 15.2 per cent to $163.65, giving the company a market value of $49 billion, signaling investors expect a higher bid.
Allergan's stock price closed on Monday at $142, giving it a market value of about $43 billion.
Valeant yesterday detailed its buyout offer, under which, Allergan shareholders would receive $48.30 in cash and 0.83 of a Valeant stock for each share they own, valuing Allergan at $152.88 a share or $45.7 billion.
The offer is a premium of over 7 per cent to the company's closing price on Monday.
Ackman and his $13-billion hedge fund, Pershing Square Capital Management LP, which recently spent around $4 billion in amassing a 9.7-per cent stake in Allergan, supports the offer, Valeant said.
Post closing, Allergan shareholders would own 43 per cent of the combined company, and Pershing Square said it would accept only stock in exchange for its more than 28 million Allergan shares as it intends to ''remain a significant long-term shareholder of the combined company,'' Valeant said.
''Valeant and Pershing Square believe that the combination of the two companies is extremely compelling for both Allergan and Valeant shareholders and will create an unrivaled platform for growth and value creation in healthcare,'' Valeant said in a statement.
The combined company would have an ''unrivalled portfolio in ophthalmology, dermatology and aesthetics,'' Valeant added.
Speaking to shareholders and analysts in New York, Valeant's CEO, Michael Pearson said that Allergan's board had refused to discuss a merger.
When asked whether he would consider changing his offer to an all-cash offer, Pearson said Valeant would not, and indicated that his company would not pay whatever it takes to get Allergan. "If someone wants to come in and pay some ridiculous cash price, that's their choice."
But he did say that Allergan's anti-wrinkle and chronic migraine treatment drug Botox is the driver for the deal. Botox generated about $2 billion of Allergan's total 2013 revenue of $6.3 billion in 2013.
Founded about 60 years ago, Allergan is a global specialty pharmaceutical company whose product range includes ophthalmic pharmaceutical, dermatology and neurological products.
Apart from Botox, Allergan's 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, which has a history of aggressive deal making, is a multinational specialty pharmaceutical company that develops 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.
Valeant's 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.
However, not all its deal have been successful; 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 make it one of the largest pharmaceutical companies in the world, in line with Pearson's aim of making the company into one of the five largest pharmaceutical firms by market value by the end of 2016.
The deal will come under intense scrutiny from US regulators, and analysts say that Valeant may have to divest certain drugs like Botox rival Dysport, anti ageing treatment Restylane and Perlane, used for the correction of deeper wrinkles and folds.
