Valeant plans to grow
Quebec firm, investor bid $48B for Botox-maker
Valeant Pharmaceuticals is teaming up with U.S. activist investor Bill Ackman to buy Botox-maker Allergan in a cash-and-stock deal worth about $48 billion US that could be the next step in the Canadian company’s goal to become one of the world’s largest drug companies.
Quebec-based Valeant, already one of Canada’s largest specialty pharmaceutical companies, says a combination with California-based Allergan would be good for shareholders of both companies.
It’s proposing to exchange $48.30 US in cash and 0.83 shares of Valeant for each of Allergan’s more than 299 million shares — making the deal worth about $48 billion US based on Valeant’s closing price of $135.41 US in New York. Allergan Inc. stockholders would own 43 per cent of the combined company. In Toronto, Valeant stock closed at $149.30 C, up $10.62 or 7.65 per cent.
Allergan shares closed up $21.65 or 15.25 per cent at $163.65 US in New York, giving the company a market cap of $48.95 billion US.
Ackman’s Pershing Square Capital Management LP — Allergan’s biggest stockholder at 9.7 per cent — has agreed to take only stock in the transaction.
“This is the most synergistic combination of any kind I’ve seen as an investor in 20-something years in the business and I want to be a part of it,” Ackman, an investor activist and hedge fund manager, said during an investor conference in New York City on Tuesday.
In addition to promoting the transaction, he spent much of the meeting vaunting Valeant’s growth strategy: focus on controlling costs and rewarding shareholders.
He said Valeant’s competitive strength is its low research and development spending, strong freecash flow and decentralized business model. Its lack of reliance on patent drugs and government purchases makes its revenues “more durable” and its margins very strong, he said.
If an acquisition happens, it would give Valeant an array of other drugs and add to a string of more than 50 acquisitions that have made it one of Canada’s largest drugmakers.