Valeant’s Allergan bid would set record
$45.7B takeover on track for Botox maker
A $ 45.7- billion US bid by Valeant Pharmaceuticals International Inc. to buy Botox maker Allergan Inc. would mark the biggest takeover in Canadian history.
The proposed acquisition by Valeant, based in Laval, Que., would surpass Vivendi SA’s $43.9-billion purchase of spirits maker Seagram Co. in 2000, and Rio Tinto Group’s $42.9-billion acquisition of Alcan Inc. in 2007. Transactions are announced values and include debt.
Valeant on Monday offered Allergan investors $48.30 in cash and 0.83 of a share for each Allergan share. Pershing Square Capital Management LP, the fund run by Bill Ackman and Allergan’s largest shareholder with a 9.7 per cent stake, supports the offer, Valeant said.
Valeant chief executive officer Mike Pearson, 54, took the helm in 2008 and has spent at least $19 billion buying more than 35 companies as part of Valeant’s goal to join the ranks of the world’s five biggest drugmakers by the end of 2016. The Allergan deal would be his biggest acquisition, eclipsing the $8.7-billion purchase of eyecare company Bausch & Lomb Inc. last year.
Only a handful of health-care companies have the “durability” of the combined product portfolio of Valeant and Allergan, Ackman said Tuesday at an investor meeting.
He called the deal a “great transaction.”
The bid is a “substantial premium” on Allergan’s unaffected price of $116.63 April 10, the day before Pershing crossed the five per cent ownership level and began its rapid accumulation program, Valeant said.
Valeant and Pershing’s Ackman, 47, think Allergan is undervalued and an attractive investment, according to a filing with the U.S. Securities and Exchange Commission. Pershing amassed 9.7 per cent of Allergan after reaching an agreement with Valeant to jointly pursue a hostile takeover of the company, the filing showed.
Allergan’s board will review the unsolicited bid in con- sultation with financial and legal advisers and “pursue the course of action that it believes is in the best interests of the company’s shareholders,” the Irvine, Calif.-based company said.
Ackman structured the Valeant-Allergan deal and approached Valeant with the idea, said Jeff Ubben, chief executive officer of ValueAct Holdings LP, Valeant’s thirdlargest shareholder.
Making the bid with Ackman’s support gives Valeant “a running start on the vote, and a bit of a block position,” Ubben said Tuesday in New York. ValueAct’s Mason Morfit is leaving Valeant’s board, Ubben said.
Valeant has been expanding from its major emphasis in generic drugs into specialty medicines and areas where it had a smaller presence such as ophthalmology, dermatology and dentistry.
The company’s market value at Monday’s close was $42 billion, meaning an acquisition of Allergan would likely more than double its worth and put it about halfway to its goal.
Valeant has been trying to interest Allergan in a friendly deal for more than a year, Ubben said.
Allergan said in a statement Monday it “has had no discussions with Valeant or Pershing Square with respect to this matter.”
A combination of Valeant and Allergan “would make a lot of sense,” Timothy Chiang, an analyst at CRT Capital Group LLC in Stamford, Conn., said. “The question has always been, it’s not whether Valeant would be interested in buying Allergan, it’s a question of would Allergan sell to Valeant.”
Allergan’s shares have increased 25 per cent over the past 12 months through Monday