Actavis To Acquire Allergan In $66 Bln Deal

(RTTNews) - Specialty pharmaceutical company Actavis plc (ACT) agreed Monday to acquire botox maker Allergan, Inc. (AGN) in a cash and stock deal valued at about $219 per share or $66 billion.

The deal will enable Allergan to fend off a hostile takeover bid from Canadian drug maker Valeant Pharmaceuticals, Inc. (VRX.TO, VRX), which is supported in its bid by activist investor William Ackman's Pershing Square Capital Management LP.

Irvine, California-based Allergan had held talks to buy Salix Pharmaceuticals Ltd. (SLXP) in order to fend off the $53 billion hostile bid from Valeant Pharma, but failed to reach a deal over valuation concerns.

Allergan was trying to strike a deal before an investor meeting on December 18. The company is best known for its sales of wrinkle treatment Botox, while Actavis' best-selling drug is Alzheimer's treatment Namenda.

The deal will create a top 10 global growth pharmaceutical company by sales revenue, with combined annual pro forma revenues in excess of $23 billion anticipated in 2015.

"The combined company will have a strong balance sheet, growing product portfolios and broad commercial reach extending across 100 international markets. Our combined experienced management team is dedicated to driving strong organic growth while capturing synergies and maintaining a robust investment in strategically focused R&D," Actavis President and CEO Brent Saunders said in a statement.

The combined entity will have a commercial presence across 100 markets, including an enhanced presence across Canada, Europe, Southeast Asia and Latin America and a strong footprint in China and India. The enhanced portfolio of brands, generics, branded-generic and over-the-counter products will enable Actavis to boost growth in international markets.

Actavis said its existing blockbuster CNS, Gastroenterology and Women's Health franchises will be complemented by Allergan's blockbuster franchises in Ophthalmology, Neurosciences, and Medical Aesthetics/Dermatology/Plastic Surgery to create a leading portfolio across a broad range of therapeutic areas.

The deal will see Allergan shareholders receive a combination of $129.22 in cash and 0.3683 Actavis shares for each share of Allergan common stock. The offer is valued at $219 per share, based on Actavis' closing price of $243.77 on Friday.

The offer price also represents a 10.2 percent premium over Allergan's closing price of $198.65 on Friday. The deal, unanimously approved by the boards of directors of both companies, is anticipated to close in the second quarter of 2015.

The closure of the deal is primarily subject to the approval of the shareholders of both companies, as well as customary antitrust clearance in the U.S., the EU and certain other jurisdictions.

Actavis expects to fund the cash portion of the consideration with a combination of new senior unsecured notes, term loans and equity securities. The company has committed bridge facilities from JP Morgan Chase Bank, N.A., Mizuho Bank and Wells Fargo. However, the deal is not subject to a financing condition.

Actavis noted that it anticipates the expected permanent financing structure, consisting of a combination of new equity and debt, to support an investment grade rating and provide long-term financing flexibility.

The deal will help double the revenue generated by Actavis' North American specialty brands business and double the international revenue of the combined company. The company is projected to have about $5 billion in pro forma 2015 international revenue.

Actavis said the deal will greatly enhance its U.S. and international commercial opportunities. It will also enhance its commercial position, expand its portfolio and broaden its footprint in Canada, Europe and Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.

The combined company will be led by Saunders, with Paul Bisaro remaining the executive chairman of the board. Additionally, two members of the Allergan Board of Directors will be invited to join the Actavis Board of Directors following the completion of the deal.

The deal will result in double-digit accretion to Actavis' adjusted earnings within the first 12 months. It will also be positioned for long-term double-digit organic revenue and earnings growth.

Actavis said it expects the deal to generate at least $1.8 billion in annual synergies commencing in 2016, in addition to the $475 million of annual savings previously announced by Allergan in connection with Project Endurance. It will also generate strong free cash flow of more than $8 billion in 2016 and substantial growth thereafter, which will enable the rapid repayment of debt.

Actavis also plans to maintain annual R&D investment of about $1.7 billion, ensuring the appropriate resource allocation to continue driving exceptional organic growth.

Dublin, Ireland-based generic drug maker Actavis had obtained an Irish tax domicile by acquiring Warner Chilcott Plc in a so called tax inversion deal last year.

In Monday's regular trading session, ACT is currently trading at $252.54, up $8.77 or 3.60% on a volume of 8.65 million shares, and AGN is trading at $211.93, up $13.28 or 6.69% on a volume of 9.65 million shares.