Fidelity Ups Its Stake In Allergan Inc. As Actavis Bid Rumors Fly; Potential $60 Billion Deal

Fidelity Ups Its Stake In Allergan As Actavis Bid Rumors Fly

October 10, 2014

By Riley McDermid, BioSpace.com Breaking News Staff

News that Actavis has approached Botox maker Allergan about merging added a new chapter Friday, when Reuters reported that Actavis’s largest stakeholder, Fidelity Investments, has also increased its holdings in Allergan ahead of any potential deal.

Fidelity has added around 2 million shares of Allergan to its already 3.88 million slice, according to the firm’s monthly filings, reported Reuters.

An unnamed source told the news service that Boston-based investment Fidelity “would be open to taking Actavis' shares if the drugmaker comes up with a rival bid using its own stock as currency,” adding the company’s fund managers approved of Allergan's standalone business plan.

It is estimated that if its bid is accepted, Actavis could pay more than $60 billion for Allergan--making it one of the largest bets ever made by a traditional generic drugmaker on an expanding branded medicine market.

Actavis’s bid is rumored to be favored above an increasingly bitter hostile $53 billion takeover by Valeant Pharmaceuticals International . That deal has been championed by activist investor Bill Ackman and his hedge fund Pershing Square Capital Management, and has had both parties in and out of court for the majority of 2013.

Fidelity has simultaneously been reducing its stake in Valeant, which began unloading shares in the company in April as the fractious takeover bid gained steam.

Biotech analysts have been largely supportive of a possible Actavis/Allergan deal. "Based on our discussions with investors, we believe fundamental investors who own Allergan... are inherently more comfortable with the Actavis business model than the Valeant model," wrote Bernstein Research analysts in a note Wednesday. "Exchanging Allergan shares for Actavis shares would not force many of them to sell, as they might with Valeant position."

Valeant and Allergan have both been using the legal system to force their points. In August, Allergan sued the two companies, alleging their cozy relationship has run afoul of insider trading regulations. Ackman owns 9.7 percent of Allergan, an amount the company has asked a court to disqualify as counting towards a 25 percent shareholder quorum.

Allergan has already had to concede that 35 percent of its shareholders have asked for a special meeting with management slated for Dec. 18., during which the takeover bid was likely to be heavily favored, prior to a competing Actavis offer..

The shareholders involved only own around 2.8 percent of Allergan but they meet the threshold under U.S. securities law, which requires 25 percent of a company’s investors to call a special meeting for shareholders.

Back to news