April 22, 2014 4:57 pm

Allergan contests details of $45.6bn Valeant bid

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Activist investor Bill Ackman©Bloomberg

Activist investor Bill Ackman is backing the Valeant bid

A takeover battle at the top of the world’s drugs industry emerged on Tuesday after Allergan, the maker of Botox, claimed to have had no warning about an unsolicited $45.6bn bid from rival pharmaceutical group Valeant.

The cash and stock offer, confirmed on Tuesday morning, sent shares in Allergan soaring 16 per cent, giving the company a market value of $49.4bn. That was 8 per cent above the value of the cash and stock bid, signalling that investors are betting on a higher offer emerging.

In a brief statement acknowledging the offer, Allergan said it has had no contact concerning the bid with Valeant or Bill Ackman, the activist investor who owns nearly 10 per cent of its shares and who is backing Valeant’s bid.

The company added that neither had “put forward an offer or proposal with respect to any type of merger transaction”.

The statement is at odds with claims made earlier in the day by Valeant, which said it was making its offer public after being rebuffed by Allergan in private discussions.

The bid values the Botox-maker at $152.89 per share, based on Valeant’s price at the close of trading on Monday. That is a premium of about 30 per cent over the $116.63 the company was trading at when Mr Ackman passed the 5 per cent share ownership threshold. Under the terms offered, each Allergan share would be exchanged for $48.30 in cash and 0.83 shares of Valeant common stock.

The tie-up of the two pharmaceutical groups would create an industry colossus in the skincare and eyecare markets.

Mr Ackman said the combination represented “the most strategic and value-creating transaction I have ever analysed”. His stake in Allergan is the largest single investment his Pershing Square group has yet made, with a value of more than $4bn.

Michael Pearson, Valeant’s chief executive, said the offer represented “an undeniable opportunity to create extraordinary value for both Allergan and Valeant shareholders”.

The coming together of Mr Ackman and Valeant marks an unusual marriage between activism and more traditional corporate dealmaking. Activists typically build stakes in companies and use their investment to lobby for operational or financial change.

Mr Ackman has carved out a reputation as being among the most adversarial of Wall Street’s activists, engaging in public altercations with companies spanning healthcare, industrials and consumer goods. Most recently, he has been in the press for his campaign against Herbalife, the vitamin supplements company.

Valeant has been among the world’s most acquisitive drugmakers during the past five years. Since taking over as chief executive in 2008, Mr Pearson has led the takeover of more than 35 companies at a cost of close to $20bn.

Valeant also has an activist investor in its stock. ValueAct is its third-largest equity holder, with more than 5 per cent of its shares, according to Bloomberg data. ValueAct is expected to give up the seat it has on Valeant’s board of directors if the deal goes through.

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