Actavis plans to acquire Allergan for $66 billion, in a blockbuster deal that creates a top-tier global pharma by sales revenue—and, Allergan hopes, will thwart a hostile takeover attempt by Valeant Pharmaceutical Industries.

Actavis is offering to pay more for Allergan than Valeant, which made several bids for the Botox developer, starting at $47.5 billion in April and rising to $53 billion in July. However, Allergan CEO David Pyott and the company’s board consistently resisted Valeant’s overtures.

They contended that Valeant had undervalued Allergan, and differed with Valeant’s announced promised to sell or eliminate earlier-stage Valeant R&D programs—consistent with the company’s approach, seen after several earlier acquisitions.

Under CEO Mike Pearson, Valeant has acquired some three-dozen companies at a combined cost of $19 billion, toward its goal of becoming a top-five biopharma in market capitalization by 2016.

In a statement today, Valeant said Actavis' price is too high, but offered no hint of a response to the deal pending a review: “While we will review any such agreement in determining our course of action, Valeant cannot justify to its own shareholders paying a price of $219 or more per share for Allergan,”  J. Michael Pearson, Valeant's chairman and CEO, said in a statement issued this morning by his company.

The boards of Acvtavis and Allergan have unanimously approved the combination of their companies, which would have pro forma revenues of more than $23 billion anticipated in 2015.

Actavis and Allergan said the combined company would enjoy combined revenues of approximately $4 billion for its specialty product franchises in gastroenterology, cardiovascular, women's health, urology, and infectious disease treatments. The combination would also have three blockbuster franchises each with annual revenues in excess of $3 billion in ophthalmology, neurosciences/CNS and medical aesthetics/dermatology/plastic surgery.

“This acquisition creates the fastest growing and most dynamic growth pharmaceutical company in global healthcare, making us one of the world's top 10 pharmaceutical companies,” Brent Saunders, Actavis’ CEO and President, said in a statement. He would retain his position in the combined company, as would Paul Bisaro, now Actavis’ executive chairman.

“We will establish an unrivaled foundation for long-term growth, anchored by leading, world-class blockbuster franchises and a premier late-stage pipeline that will accelerate our commitment to build an exceptional, sustainable portfolio,” Saunders added.

While Actavis and Allergan said they planned to squeeze out projected cost cuts or “synergies” of at least $1.8 billion, the companies also promised to maintain R&D spending of approximately $1.7 billion, and add about 15 “near- and mid-term development” projects.

The planned synergies are in addition to the annual pre-tax savings of approximately $475 million in 2015 that Allergan said it would generate through a restructuring announced July 21, highlighted by the layoff of about 1,500 employees, 13% of Allergan’s workforce.

The pledge of maintaining $1.7 billion for R&D contrasts with Valeant’s promise in April that it would undertake “at least $300 million in annual R&D spend to complete future high-probability and late-stage projects” already in Phase III, including current and future line extensions, and life cycle management programs: “The new company will continue to fund both companies' late stage development programs, including those in dry eye, diabetic macular edema, glaucoma, migraine, eye whitening, psoriasis, and other dermatology areas,” Valeant stated at the time.

At $219 a share, Actavis’ offer for Allergan consists of $129.22 in cash—the closing price of Actavis shares on Nov. 14—and 0.3683 Actavis shares for each share of Allergan common stock.

The companies said Actavis expects to finance the cash portion of the deal through a combination of new senior unsecured notes, term loans and equity securities. Actavis said it has committed bridge facilities from JP Morgan Chase Bank, N.A., Mizuho Bank, and Wells Fargo, and commitments to replace its existing facilities “to the extent they are not amended,” to permit the acquisition and the related financing.

Two unnamed members of Allergan’s board of directors will be invited to join Actavis’ board of directors following the completion of the transaction, the companies said.

“Together with Actavis, we are poised to extend the Allergan growth story as part of a larger organization with a broad and balanced portfolio, a meaningful commitment to research and development, a strong pipeline and an unwavering focus on exceeding the expectations of patients and the medical specialists who treat them,” Pyott said in the statement.








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