November 13, 2014
By Mark Terry, BioSpace.com Breaking News Staff
As reported yesterday, New York-based Pershing Square Capital Management LP announced it had acquired 8.5 percent of global animal health company Zoetis Inc. stock, but the company may be looking at other possible acquirers, including Valeant Pharmaceuticals International . Rumors immediately swarmed around the possibility of Pershing Square’s Bill Ackman forcing Zoetis into a sale to Bayer AG , Merck & Co. , or Eli Lilly & Co. .
Perhaps a more likely possibility is a sale to Valeant, headquartered in Laval, Quebec. Pershing and Valeant have been tangled in a disruptive hostile takeover bid of Irvine, Calif.-based Allergan Inc. for months. In part to fend off the clearly unwanted bid, Allergan has been in talks with Irish pharmaceutical company Actavis to merge. Unnamed sources reported by Bloomberg News on Wednesday indicates that the two companies have a $3 billion gap in their negotiations, which is not insurmountable in that Actavis plc wants about $60 billion and Allergan wants $63 billion.
“Valeant needs to jump into the bidding right now or they won’t be able to win this,” said Aaron “Ronny” Gal, an analyst with Bernstein Research in a statement. “It looks like Actavis will probably be the preferred deal.”
This has led some analysts to predict that if the Valeant/Pershing-Allergan deal falls through, a Valeant acquisition of Zoetis would be a backup plan. “Valeant may be getting a plan B ready,” said Tim Chiang, an analyst for CRT Capital Group in a phone interview with Bloomberg. “Zoetis would check off all of the boxes as far as what Valeant is looking for.”
Allergan has been adamant in its opposition to the Valeant takeover, citing that the offering price was “grossly inadequate” and expressing concerns about Valeant’s business model. In eight years Valeant has acquired over 100 companies. It then typically cuts R&D costs in order to increase profits.
To date, Zoetis has not shown much resistance to a potential Valeant acquisition. In last week’s earnings call, Zoetis’ Paul Herendeen, chief financial officer, said, “We’re a public company, we’re for sale every day.”
Valeant’s business interests are broad, focusing on dermatology, eye health, aesthetics, consumer products, neurology and oral health. Zoetis, headquartered in Florham Park, N.J., develops and markets drugs and vaccines for animals, as well as provides complementary diagnostic products, genetic tests and services.
