A white knight for Allergan?

As Valeant's pursuit of Allergan continues, sources claim Actavis is in talks to acquire the company

Kelsey Kaustinen
One of the industry's most protracted and hostile acquisition sagas continues into its seventh month as Allergan Inc. continues to rebuff Valeant Pharmaceuticals International Inc.'s attempts to acquire the company. Valeant's offer, which originated in April, currently stands at $54 billion. Aug. 15 had been the original expiration date for the offer; at that time, roughly 12,509,606 shares of Allergan common stock had been tendered to the offer. The offer was extended to Dec. 31 the same day.
 
Allergan has remained unmoved through Valeant's offer increases, maintaining that even the increased proposal vastly undervalues Allergan and its future potential. In light of the board's disinterest, Valeant has appealed to Allergan's shareholders directly. Both companies have also taken the matter to court. On Nov. 4, Valeant announced that the United States District Court for the Central District of California held that Pershing Square Capital Management, L.P., Valeant Pharmaceuticals International, Inc. and related parties could vote shares of Allergan at the Dec. 18 meeting.
 
The same day, Allergan shared a court announcement of its own, posting a release discussing the California Federal Court ruling regarding Allergan's insider trading lawsuit against Valeant and Pershing Square. According to Allergan's press release, “The Court ordered that Valeant and Pershing Square must make 'corrective disclosures to their September 24, 2014 proxy solicitation statement in compliance with Section 14(a) of the Securities Exchange Act and Rule 14a-9 promulgated thereunder, including disclosure of the facts underlying Defendants' exposure to liability under Section 14(e) of the Securities Exchange Act and Rule 14e-3 promulgated thereunder.' Specifically, the Court ordered that Pershing Square and Valeant must disclose that: 'Pershing Square and Valeant's February 25 Relationship Agreement included an agreement that Pershing Square and Valeant agreed to be called "co-bidders" if the Allergan-Valeant transaction occurred by way of tender offer,' and Allergan and Karah M. Parschauer's federal lawsuit against Pershing Square, Valeant and PS Fund 1 alleged that they violated Rule 14e-3 by causing PS Fund 1 to acquire Allergan shares between February and April 2014 without publicly disclosing information about Valeant's plans for a tender offer.”
 
Valeant noted on Oct. 27 that it was prepared to up the stakes again, commenting that “Valeant is prepared to improve its offer and provide value to your shareholders of at least $200 a share. We are confident that an increase in our stock price, and in consideration, will provide that value. No other potential acquirer of Allergan has the operational and tax synergies that we have, and no other potential acquirer of Allergan can provide the value that we can.”
 
That last claim might be put to the test, however, as rumors have surfaced this week that Allergan might have a white knight bidder in Actavis plc, which sources say might be willing to offer $200 to $220 per share, for a total deal value of roughly $60 billion. (Allergan's stock is currently trading at roughly $198 per share on the New York Stock Exchange.) While nothing to that effect has been officially shared by Actavis at this point, sources posit that a deal might be made within the next two weeks.
 
Whichever way the issue falls, it is possible a resolution could be seen by the end of the year. A special meeting of Allergan shareholders, initiated by Pershing Square CEO William Ackman, is scheduled for Dec. 18, in hopes of replacing a majority of Allergan's board members and moving toward discussion of a takeover. If Allergan is to avoid Valeant's hostile takeover attempt, it will need to strike a deal with Actavis soon.

Kelsey Kaustinen

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