(Adds Allergan adopting shareholder rights plan in paragraph 5)
By Rod Nickel and Bill Berkrot
April 22 Canada's Valeant Pharmaceuticals
International Inc said on Tuesday it and activist
investor Bill Ackman made an unsolicited $47 billion bid to buy
Botox maker Allergan Inc as it seeks to become one of
the world's five biggest drug companies.
The offer, if successful, would bring together two mid-sized
pharmaceutical companies with expertise in skin care and eye
care products, and is highly unusual as activist investors
typically buy stakes and then agitate for strategic change.
Ackman's Pershing Square Capital Management, Allergan's
largest shareholder with a 9.7 percent stake, disclosed in a
filing on Monday it is supporting the bid.
Allergan said in a statement that it has received the offer,
and will carefully consider the proposal and "pursue the course
of action that it believes is in the best interests of the
Late on Tuesday, Allergan said it adopted a shareholder
rights plan effective April 22 that will trigger if a person or
group acquires 10 percent or more of its shares.
Valeant offered to pay $48.30 a share in cash and 0.83 of
its common share for each Allergan share, valuing Allergan at
$152.88 a share, a premium of over 7 percent to the company's
closing price on Monday.
The offer is 31 percent higher than Allergan's stock price
on April 10, the day before Pershing Square's ownership reached
Shares of Allergan jumped 15.2 percent to $163.65 in New
York, signaling investors expect a sweetened bid to emerge.
Valeant stock rose 7.5 percent to $135.41.
Valeant has been on a buying spree since 2010 and last year
acquired contact lens maker Bausch & Lomb Holdings. Chief
Executive Michael Pearson said in January the drugmaker wants to
become one of the world's top five pharmaceutical companies by
market capitalization by the end of 2016, largely through
"The big valuation driver is Botox," Pearson said, speaking
about the Allergan bid to about 200 shareholders and analysts in
Pearson said Allergan Chief Executive David Pyott and the
company's board had been unwilling to discuss a merger with
Valeant. In a letter to Allergan, Valeant said it would have
preferred to negotiate a deal in private.
Pearson said Valeant would definitely not turn its bid into
an all-cash offer, and suggested the company could still walk
away if Allergan's price gets too high.
"We don't view this as we're going to pay whatever it takes
to get Allergan, because we won't," he said. "If someone wants
to come in and pay some ridiculous cash price, that's their
Ackman, who also addressed shareholders, called the deal the
most synergistic he has seen, and said he is already talking
with Valeant about their next deal.
The Laval, Quebec-based company, whose products include
antidepressant drug Wellbutrin and over-the-counter remedy
Cold-FX, favors targets where it can aggressively cut costs.
Valeant said it expects to realize at least $2.7 billion in
annual cost synergies from a combination with Allergan.
A large-scale cost-cutting approach may not work at Allergan
without damaging the business, BMO Capital Markets analyst David
Maris said in a note.
But J.P.Morgan analyst Chris Schott said the potential for
savings from operating expenses and Valeant's low tax rate is
Allergan, which also has a lucrative portfolio of ophthalmic
drugs to treat conditions such as glaucoma and dry eye, is
larger by revenue, reporting $6.3 billion in sales last year.
Valeant reported $5.8 billion in revenue last year.
Pearson said he doesn't expect the offer to raise antitrust
The Federal Trade Commission, which shares the work of
antitrust enforcement with the U.S. Justice Department, will
likely review this proposed transaction, according to an
antitrust attorney, who declined to be named for business
"It's like any of these big drug deals, if there's overlap
in certain products then, like prior deals in this space, they
can divest one of the products to get the deal through," the
antitrust expert said.
Valeant is already in talks with potential buyers of
products the new company would divest, Pearson said, naming
Valeant's Botox competitor, Dysport, as well as its Restylane
and Perlane product lines. Combined sales of those lines could
reach about $250 million, Schott said.
(Reporting by Euan Rocha in Toronto, Rod Nickel in Winnipeg,
Esha Dey in Bangalore, Diane Bartz in Washington and Caroline
Humer in New York; Editing by Saumyadeb Chakrabarty, Nick
Zieminski and Meredith Mazzilli)