Allergan, the maker of Botox, has resisted selling itself to another company for most of the year. On Monday, however, it agreed to be acquired for $66 billion by Actavis, another big drug maker.
The deal, worth $219 a share in cash and stock, presents a monumental roadblock for Valeant Pharmaceuticals International and the hedge fund manager William A Ackman, the unlikely consortium that teamed up in April to start what became a hostile bid for Allergan.
After seven months of bids, bluster and lawsuits, Valeant and Ackman's firm, Pershing Square Capital Management, appeared to be throwing in the towel on their efforts to buy Allergan.
In a statement after the announcement of the Actavis deal, Valeant's chief executive, J Michael Pearson, said, "While we will review any such agreement in determining our course of action, Valeant cannot justify to its own shareholders paying a price of $219 or more per share for Allergan."
"Our business is performing extremely well as evidenced by our third-quarter results, our expected strong fourth quarter, and our robust outlook for 2015, and I am confident in our continued ability to generate exceptional shareholder value," Pearson said.
Actavis appears poised to make its biggest deal ever, and the biggest acquisition in a year full of big deals, eclipsing the $45-billion Comcast takeover of Time Warner Cable and AT&T's $48.5-billion purchase of DirecTV. It would be the third-largest health care deal ever in the United States, according to Standard & Poor's Capital IQ.
In early trading, shares of Allergan were up nearly seven percent, but still below the takeover offer price.
Actavis was until recently based in Parsippany, New Jersey, but last year it agreed to acquire an Irish drug-maker, Warner Chilcott, and relocate its headquarters abroad, striking one of the first big so-called inversions.
Actavis's deal to move abroad and reduce its tax bill caught the attention of other drug companies, and set off a rush of similar deals. Soon the exodus of big corporations was drawing scorn from regulators in Washington, and in September, the treasury department passed new rules to make it harder for companies that strike inversions to find tax savings.
But because Actavis has already completed its move abroad, it is exempt from the new treasury department rules, and will be able to pay fewer taxes on Allergan's international sales and use Allergan's overseas cash to help finance the deal. Actavis already took advantage of its newfound financial flexibility as an Irish company this year when it acquired Forest Laboratories.
Actavis is offering a significantly higher price than what Valeant and Pershing Square could muster. In April, the pair opened their bidding for Allergan at $47 billion. A series of raises brought the current value of their offer to about $53 billion.
And in a recent letter to the Allergan board, Mr. Pearson said his group could offer cash and stock worth up to $200 a share if Allergan would come to the bargaining table.
But Actavis's offer of $219 a share may put Allergan out of reach for Valeant and Pershing Square.
The Actavis deal represents something of a vindication for Allergan's Chief Executive David E I Pyott. For much of the year, he and the Allergan board had been under attack from analysts, investors and shareholder advisory firms for resisting the approaches by Valeant and Pershing Square.
A main argument he made in resisting entering into negotiations was that Valeant was a fundamentally unsound company, built on a rapid series of acquisitions with little underlying growth.
He also assailed Valeant's reputation for sharply reducing research and development spending. For these reasons, Pyott said, it would be irresponsible to sell the company for compensation consisting largely of Valeant stock.
For Valeant and Pershing Square, watching Allergan be sold to Actavis is not a total loss. Ackman's firm owns 9.7 per cent of Allergan and will profit handsomely from the sale to Actavis.
"Today's transaction provides Allergan stockholders with substantial and immediate value, as well as the opportunity to participate in the significant upside potential of the combined company," Pyott said in a statement. "We are combining with a partner that is ideally suited to realize the full potential inherent in our franchise. Together with Actavis, we are poised to extend the Allergan growth story as part of a larger organisation with a broad and balanced portfolio, a meaningful commitment to research and development, a strong pipeline and an unwavering focus on exceeding the expectations of patients and the medical specialists who treat them."
The deal, worth $219 a share in cash and stock, presents a monumental roadblock for Valeant Pharmaceuticals International and the hedge fund manager William A Ackman, the unlikely consortium that teamed up in April to start what became a hostile bid for Allergan.
After seven months of bids, bluster and lawsuits, Valeant and Ackman's firm, Pershing Square Capital Management, appeared to be throwing in the towel on their efforts to buy Allergan.
In a statement after the announcement of the Actavis deal, Valeant's chief executive, J Michael Pearson, said, "While we will review any such agreement in determining our course of action, Valeant cannot justify to its own shareholders paying a price of $219 or more per share for Allergan."
"Our business is performing extremely well as evidenced by our third-quarter results, our expected strong fourth quarter, and our robust outlook for 2015, and I am confident in our continued ability to generate exceptional shareholder value," Pearson said.
Actavis appears poised to make its biggest deal ever, and the biggest acquisition in a year full of big deals, eclipsing the $45-billion Comcast takeover of Time Warner Cable and AT&T's $48.5-billion purchase of DirecTV. It would be the third-largest health care deal ever in the United States, according to Standard & Poor's Capital IQ.
In early trading, shares of Allergan were up nearly seven percent, but still below the takeover offer price.
Actavis was until recently based in Parsippany, New Jersey, but last year it agreed to acquire an Irish drug-maker, Warner Chilcott, and relocate its headquarters abroad, striking one of the first big so-called inversions.
Actavis's deal to move abroad and reduce its tax bill caught the attention of other drug companies, and set off a rush of similar deals. Soon the exodus of big corporations was drawing scorn from regulators in Washington, and in September, the treasury department passed new rules to make it harder for companies that strike inversions to find tax savings.
But because Actavis has already completed its move abroad, it is exempt from the new treasury department rules, and will be able to pay fewer taxes on Allergan's international sales and use Allergan's overseas cash to help finance the deal. Actavis already took advantage of its newfound financial flexibility as an Irish company this year when it acquired Forest Laboratories.
Actavis is offering a significantly higher price than what Valeant and Pershing Square could muster. In April, the pair opened their bidding for Allergan at $47 billion. A series of raises brought the current value of their offer to about $53 billion.
And in a recent letter to the Allergan board, Mr. Pearson said his group could offer cash and stock worth up to $200 a share if Allergan would come to the bargaining table.
But Actavis's offer of $219 a share may put Allergan out of reach for Valeant and Pershing Square.
The Actavis deal represents something of a vindication for Allergan's Chief Executive David E I Pyott. For much of the year, he and the Allergan board had been under attack from analysts, investors and shareholder advisory firms for resisting the approaches by Valeant and Pershing Square.
A main argument he made in resisting entering into negotiations was that Valeant was a fundamentally unsound company, built on a rapid series of acquisitions with little underlying growth.
He also assailed Valeant's reputation for sharply reducing research and development spending. For these reasons, Pyott said, it would be irresponsible to sell the company for compensation consisting largely of Valeant stock.
For Valeant and Pershing Square, watching Allergan be sold to Actavis is not a total loss. Ackman's firm owns 9.7 per cent of Allergan and will profit handsomely from the sale to Actavis.
"Today's transaction provides Allergan stockholders with substantial and immediate value, as well as the opportunity to participate in the significant upside potential of the combined company," Pyott said in a statement. "We are combining with a partner that is ideally suited to realize the full potential inherent in our franchise. Together with Actavis, we are poised to extend the Allergan growth story as part of a larger organisation with a broad and balanced portfolio, a meaningful commitment to research and development, a strong pipeline and an unwavering focus on exceeding the expectations of patients and the medical specialists who treat them."
©2014 The New York Times News Service