Actavis acquires Allergan for $66 billion in cash and stock

Allergan Inc has accepted a $66 billion takeover bid from Irish based Actavis Plc, putting an end to the hostile takeover attempt by William Ackman and Valeant Pharmaceuticals. A hostile takeover occurs when the target company does not want to be acquired by the corporate raider.

Actavis offered $219 per share in cash and stock, which is billions more than Valeant offered – Valeant walked away from its pursuit to acquire Allergan as soon as the deal with Actavis was announced.

This finally puts an end to several months of Valeant-Pershing attempting to push Allergan into accepting a deal that simply was not “adequate” enough according to Allergan executives.

Allergan argued that Valeant’s most recent offer in cash and stock, worth $54 billion, would negatively impact its shareholders, given the Canadian company’s tendency to slash research and development spending.

Valeant wanted to decrease R&D spending by $900 million as part of the deal.

However, not only has Actavis offered more money to acquire Allergan, it has also agreed to only cut $400 million in R&D.

This would integrate the operations of the two companies and could ensure that Allergan’s experimental eye treatments for macular degeneration and glaucoma remain in development.

William Ackman’s Pershing Square $18 billion hedge fund disclosed a 10 percent stake in Allergan in April, it will make around 2.3 billion from Allergan’s buyout by Actavis.

The hedge fund has around 30 percent of its capital invested in Allergan.

Actavis Chief Executive Officer Brent Saunders said in an interview:

“As he was in discussions, or the throes of battle, with Valeant and Pershing Square, we would connect from time to time, and I would let him know that we were a friend and we thought it made sense – from 10,000 feet – to combine the businesses.”

However real talks about a deal didn’t happen until a few weeks ago.

The new company will operate from where Allergan is based in California, as well as in New Jersey. Its tax rate will be 15 percent, much lower than the current tax rate Allergan’s faces of about 26 percent.

Allergan shares increased by 5 percent to $208.69. Actavis was up 1.3 percent to $247.

It appears as though Valeant is going to have to look for other acquisition targets.


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