By Jonathan D. Rockoff
In the latest turn in one of the most dramatic acquisition
attempts in recent years, Actavis PLC said Monday that it would pay
$66 billion in cash and stock for Allergan Inc.-a deal that appears
to have thwarted a hostile takeover of the Botox maker.
Under the terms, Actavis would pay $219 a share with nearly 60%
of the deal in cash and the rest in stock, it said. The combined
company is expected to have a roughly 15% tax rate, according to
Actavis's planned presentation on the deal that was reviewed by The
Wall Street Journal.
"We will create a top-10 pharmaceutical company," Actavis Chief
Executive Brent Saunders said in a conference call Monday. The deal
could close in the second quarter of next year subject to
shareholder and regulatory approvals.
The companies appear to have shielded Allergan from a hostile
takeover by Valeant Pharmaceuticals International Inc., which had
bid $53 billion for Allergan but had indicated more recently it may
raise its offer. Valeant and activist investor William Ackman since
April have been seeking to seal a deal.
Valeant CEO Michael Pearson said the company would review
Actavis's offer but indicated the price was now too steep for a
counteroffer.
"Valeant cannot justify to its own shareholders paying a price
of $219 or more per share for Allergan," Mr. Pearson said. "We will
remain focused on delivering strong organic results and evaluating
acquisition opportunities as we always have: prudently, in a
disciplined manner, and in the best interests of our
shareholders."
Shares of Actavis rose 1.5% to $247 Monday, while Allergan
shares increased 5.7% to $210.
The moves Monday reflect many of the big trends in deal making.
Interest in health-care transactions has been particularly high
this year, which has been a robust one for mergers and
acquisitions. Actavis, as well as Valeant, was an early adopter of
the so-called inversion strategy that has increased in popularity,
in which a U.S. company pursues an overseas merger to capture a
lower foreign tax rate and other overseas tax perks.
Once based in Parsippany, N.J., Actavis inverted to Ireland when
it bought Warner Chilcott last year. Analysts have predicted that a
combination with Actavis could shave hundreds of millions of
dollars next year from the tax bill of Allergan, which is based in
Irvine, Calif.
If Actavis loses Allergan to another company, Actavis would
receive a breakup fee typical of the industry, a person familiar
with the matter said.
The boards of Actavis and Allergan have blessed the deal, the
person said.
A combination would produce at least $1.8 billion in synergies,
while keeping about $1.7 billion in research and development
spending between the two companies-roughly $400 million less than
what the companies would have spent separately, Mr. Saunders
said.
Since the spring,Allergan has been trying to fend off Valeant,
which teamed up with Mr. Ackman and his hedge fund Pershing Square
Capital Management LP to buyAllergan.
Allergan, a maker of Botox and other antiwrinkle drugs, is an
attractive target because it is the leading player in a $5 billion
world-wide cosmetic-medicine market that industry officials believe
is ripe for significant growth.
Under CEO David Pyott, Allergan sales have often risen 10% or
more year over year, more than many pharmaceutical companies.
"I see this as an Olympic torch which will be handed over to the
Actavis team," Mr. Pyott said.
Allergan, a maker of Botox and other antiwrinkle drugs, is an
attractive target because it is the leading player in a $5 billion
world-wide cosmetic-medicine market that industry officials believe
is ripe for significant growth.
Actavis, which would be led by Mr. Saunders and Actavis
Executive Chairman Paul Bisaro, projects it can maintain such
strong levels of growth companywide. It forecasts at least 10% of
organic revenue growth over the next few years.
The combined company would make for one of the world's biggest
pharmaceutical companies, selling eye, skin and stomach drugs with
$23 billion in 2015 sales and more than 30,000 employees.
Its top-selling product would be Botox, which Allergan has been
extending into medical uses beyond an antiwrinkle treatment. Mr.
Saunders indicated Actavis would continue Allergan's efforts to
expand Botox sales.
"It's a product that will be around forever, and Allergan has
proven they know how to create markets for it," he said.
Other potential combinations have also sprung up around Allergan
and Actavis this year, creating a complex web in which some
companies have shifted roles between predator and prey.
This summer, for example, Allergan held talks to buySalix
Pharmaceuticals Ltd. Such a deal would have made Allergan bigger
and more complicated for Valeant to buy, but those talks ended.
And while Actavis explored a deal for Allergan, Pfizer Inc. for
a time pursued a takeover of Actavis, a person familiar with the
matter has said. Actavis rejected such a deal, the person said.
Actavis has been hungry, earlier this year buying Forest
Laboratories Inc. for $25 billion.
David Benoit contributed to this article.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com
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