Valeant, Ackman Offer To Buy Botox Maker Allergan For $47 Billion
(Reuters) - Canada's Valeant Pharmaceuticals International Inc said on Tuesday it has partnered with activist investor Bill Ackman in an unsolicited $47 billion bid to buy Botox maker Allergan Inc in a move to eventually 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 that it is supporting the bid.
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 5 percent.
Shares of Allergan jumped 17 percent in trading before the morning bell to $166 in New York, signaling that investors expect a sweetened bid to emerge.
Valeant stock rose 5 percent to $132.60.
Valeant has been on a buying spree since 2010 and last year acquired contact lens maker Bausch & Lomb Holdings.
"This proposal represents an undeniable opportunity to create extraordinary value for both Allergan and Valeant shareholders by establishing an unrivaled platform with leading positions in ophthalmology, dermatology, aesthetics, dental and the emerging markets" said Valeant Chief Executive Michael Pearson.
Pearson said Allergan Chief Executive David Pyott and the company's board had been unwilling to discuss a merger with Valeant.
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, said BMO Capital Markets analyst David Maris, 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 compelling.
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.
Allergan spokeswoman Bonnie Jacobs declined to comment.
(Reporting by Euan Rocha in Toronto, Rod Nickel in Winnipeg and Esha Dey in Bangalore; Editing by Saumyadeb Chakrabarty, Nick Zieminski and Meredith Mazzilli)
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