Valeant Pharmaceuticals has proposed a $45.7bn cash-and-stock merger with Allergan as it continues its policy of growth by acquisition.
The deal would be Valeant’s biggest to date – well ahead of the $8.7bn purchase of eyecare specialist Bausch & Lomb last year – as it vies to break into the ranks of the top-five pharma companies.
The Quebec-based company is joining forces with Pershing Square Capital Management – run by activist investor Bill Ackman – to make the offer for Allergan. The latter confirmed yesterday it had received an unsolicited proposal and – for the moment – was advising its stockholders to “take no action.”
Valeant had already approached Allergan in the past but been rebuffed, forcing the Canadian company to go public with its merger bid.
“While [Allergan’s board] has made it clear, both privately and publicly, that they were unwilling to enter discussions with us … we are hopeful that our proposal for this extremely compelling combination will enable us to engage in productive discussions,” said Valeant chief executive Michael Pearson.
Valeant has offered $48.30 plus 0.83 Valeant shares for each Allergan share and said in a statement that combining the two companies will “create an unrivalled platform for growth and value creation in healthcare,” with a focus on specialty pharmaceutical products such as eyecare, dermatology and aesthetics products.
Adding Allergan to its stable would bring a thoroughbred in the form of blockbuster wrinkle-reducer Botox (onabotulinumtoxinA), which account for almost $2bn of Allergan’s total net sales of $6.2bn last year and would complement Valeant’s own Restylane (hyaluronic acid) product.
As with its previous acquisitions, Valeant is targeting big cost-savings from the Allergan deal which could be as much as $2.7bn a year.
Investors seemed to respond favourably to the announcement, with shares in Allergan closing up 15 per cent at $163.51 and Valeant up around 7 per cent to $134.67.
The offer comes as megamerger fever seems to have gripped the pharma sector this week. GlaxoSmithKline, Novartis and Lilly have agreed a three-way asset transfer and rumours emerging of a possible deal between Pfizer and AstraZeneca.