Coverage: Actavis nearing deal for Allergan

Actavis is close to paying nearly $63 billion for Botox maker Allergan. The deal could help Allergan fend off a hostile bid from Valeant Pharmaceuticals.

Bloomberg had these details in a story by David Welch:

Actavis Plc (ACT) is close to a deal to buy Allergan Inc. for more than $62.5 billion, a transaction that would help the maker of Botox rebuff a hostile advance from Valeant Pharmaceuticals International Inc., said people with knowledge of the matter.

A deal may be announced as soon as tomorrow, said the people, who asked not to be named because the information is private. Actavis will pay a little more than $210 a share in cash and stock for Allergan, one of the people said. Actavis’s bid includes a higher percentage of cash than Valeant’s current offer, that person said.

David Belian, a spokesman for Actavis, didn’t immediately respond to requests for comment. Bonnie Jacobs, a spokeswoman for Allergan, didn’t immediately respond to a call and e-mail requesting comment.

CNBC reported previously that Actavis was valuing Allergan at about $210 a share.

Michael J. de la Merced wrote for The New York Times that William Ackman could make lots of money if a deal with Valeant goes through:

Under the proposed terms of the transaction, Actavis would pay more than $210 a share, these people said. An agreement could be announced as soon as Monday morning.

By striking a friendly deal with Actavis, Allergan is hoping to finally cut off a monthslong hostile takeover campaign by Valeant and its partner, the hedge fund magnate William A. Ackman, who runs Pershing Square Capital Management. Valeant and Mr. Ackman have sought to pressure Allergan through a series of higher offers, the most recent of which was valued at about $53 billion, and an effort to unseat some members of the drug maker’s board.

It is unclear whether Valeant and Mr. Ackman will try to top the rival takeover bid. Still, the two would share in the huge profits that the hedge fund manager has amassed from his 9.7 percent stake in Allergan. Shares in the drug maker have risen nearly 40 percent since they made their initial offer.

Representatives for Actavis, Allergan, Valeant and Mr. Ackman declined to comment or were not immediately available for comment.

The Wall Street Journal story by Jonathan D. Rockoff, Dana Mattioli and Liz Hoffman that the deal wasn’t that certain because Valeant could raise its offer:

Closing an Actavis-Allergan deal is still a big if, however, in part because Valeant could raise its offer for Allergan.

Buying Allergan would be a big bite for Actavis, whose $64 billion market value is barely bigger than its target’s. Allergan’s shares have received a boost from the possibility it would be bought, however.

Valeant and activist investor William Ackman since April have been seeking to seal a deal with Allergan. Their most recent bid was $53 billion in cash and stock, though Valeant has considered boosting its offer. Valeant’s initial bid valued Allergan at $46 billion.

A combination of Allergan and Actavis would create a diversified pharmaceutical company selling brand-name and generic drugs for stomach, eye, skin and other conditions. The company would ring up about $23 billion a year in sales, putting it around the top 10 of pharmaceutical companies by revenue.

Edward Hammond wrote for The Financial Times about the background of the merger drama:

Allergan pursued several lines of defence, such as attempting to sue Mr Ackman and Valeant for insider trading and looking at making its own acquisitions to make itself too big for the Canadian group to swallow.

The saga has been the most enduring and complex plotline in this year’s frantic round of pharma deal making. Now that Abbvie’s £35bn bid for Shire has collapsed and the chances of Pfizer making a fresh £69bn bid for AstraZeneca have greatly diminished, a sale to Actavis would also be the biggest takeover deal of the year.

It was unclear on Sunday if Valeant and Mr Ackman would continue their pursuit of Allergan. The duo had launched a cash and stock bid that valued Allergan at $53bn, but had indicated recently that they were prepared to go higher.

Last week Mr Ackman identified Zoetis, the $22bn animal health group, as a potential acquisition target for Valeant. One person close to the Canadian group described Zoetis as a “Plan B acquisition”.

A representative for Valeant was not immediately available for comment.

While the deal isn’t necessarily a sure thing, it is not likely that Allergan will remain a standalone company. The market for beauty products and enhancements is only getting bigger and Allergan will add to the bottom line. It will be interesting to see if Ackman and Valeant or Actavis will win the prize.