Actavis (ACT) has agreed to pay about $66 billion to buy Botox-maker Allergan (AGN) in a cash-and-stock deal that likely sidelined a rival offer by Valeant Pharmaceuticals.
Actavis is planning to buy Allergan for a combination of $129.22 in cash and 0.3683 Actavis shares for each share of Allergan common stock, valuing Allergan at $219 per share based on the Friday closing price of Actavis. The deal has been approved by both boards of directors and is supported by the management teams at each of those companies.
Valeant (VRX) CEO J. Michael Pearson, in a separate statement, said his company “cannot justify to its own shareholders paying a price of $219 or more per share for Allergan.”
“We will remain focused on delivering strong organic results and evaluating acquisition opportunities as we always have: prudently, in a disciplined manner, and in the best interests of our shareholders,” Pearson said. Valeant’s latest offer was worth $54 billion.
The Actavis-Allergan deal would create a top-10 global pharmaceutical firm by sales revenue, with combined annual pro forma revenue of more than $23 billion anticipated in 2015. Actavis said it expects the deal will close in the second quarter of 2015. Actavis said it expects the deal with result in double-digit adjusted earnings growth within the first 12 months.
“Today’s transaction provides Allergan stock holds with substantial and immediate value,” said Allergan CEO David E.I. Pyott.
The combined company will be led by Brent Saunders, CEO and president of Actavis, and Paul Bisaro will remain chairman. The combined company will be led by senior management at both companies. Two members of Allergan’s board will be asked to join the Actavis board after the transaction is complete.
Actavis also said through a combination of new equity and debt, it will be able to maintain an investment-grade rating.
Valeant had first disclosed its offer to acquire Allergan in April, a takeover bid that won support from Allergan’s top shareholder, Bill Ackman’s hedge fund Pershing Square Capital Management LP. Pershing Square has sought to replace Allergan’s board with representatives that would favor the tax-inversion takeover with Canada-based Valeant. That structure would allow Valeant to squeeze additional value from the acquisition by moving Allergan’s headquarters from its current California home.