October 24, 2014
By Mark Terry, BioSpace.com Breaking News Staff
Speculation abounds on what acquisitions new Actavis CEO Brent Saunders might make, with one of the leading rumors naming Allergan , the maker of Botox, as a particularly likely target.
“A deal with Allergan would be the biggest deal they would have done so far. It’s certainly not outside the realm of possibility,” said Kevin Kendra, analyst with Gabelli & Co., in Rye, New York in a Bloomberg article. “They’ve had success with small deals, they’ve had success with larger deals. I expect them to do both.”
Actavis, domiciled in Dublin, recently acquired New York-based Forest Laboratories, Inc. The company has been in the process of streamlining Forest’s facilities, resulting in a number of layouts, including the shuttering of Forest’s New York headquarters.
Allergan has been the lengthy hostile takeover target of Canadian firm Valeant Pharmaceuticals International, Inc. and New York-based Pershing Square Capital Management. In August the U.S. Security and Exchange Commission announced they were investigating Valeant and Pershing over possible insider trading related to a March Pershing Square acquisition of 10 percent of Allergan’s stock.
Other companies rumored to be in Actavis’s crosshairs are GI drugmaker Salix Pharmaceuticals Ltd. and Omega Pharma NV. Saunders has extensive experience with large acquisitions, most notably last year’s sales of Bausch & Lomb Holdings Inc. for $8.7 billion.
Allergan’s market value is approximately $54 billion. Omega is valued at approximately $5 billion. An Allergan acquisition by Actavis would create a combined company with market capitalization of about $120 billion with approximately $17 billion in annual revenue. In addition, due to Actavis’s Dublin-based domicile, Allergan would benefit from a lower corporate tax rate. Actavis’s operational headquarters are in Parsippany, New Jersey, but after acquiring Warner Chilcott Plc in 2013, moved its tax domicile to Ireland.
Allergan has fought Valeant and Pershing’s bids from the very beginning with a lawsuit to the SEC and dueling letters and special shareholder meetings. Allergan CEO David Pyott has been very clear on his views on the Valeant bid.
“Valeant’s proposal substantially undervalues Allergan’s leading market positions, sales and marketing foundation, industry leading research and development efforts as well as future revenue and earnings growth,” he said in a May 12 conference call. “The Board is confident that our plan will create significantly more value than Valeant’s proposal. The Board also has concerns regarding the sustainability of the Valeant business model and therefore the value inherent in its stock.”
On the other hand, Umer Raffat, an equity analyst with the ISI Group in New York notes that Valeant may not be done. “Valeant can always pay more. Valeant hasn’t pushed the limit on how much they can raise.”
