Valeant Pharmaceuticals International Inc. and Pershing Square Capital Management LP are teaming up to bid for Allergan Inc. in a cash-and-stock offer for the $42.4 billion maker of the Botox wrinkle treatment, according to a regulatory filing. Allergan's shares soared on the news.
Pershing Square, the fund run by Bill Ackman, and Valeant think that Allergan’s stock is undervalued and an attractive investment, the filing Monday showed. Pershing amassed 9.7 percent of Allergan after reaching an agreement with Montreal-based Valeant to jointly pursue a hostile takeover of the company, according to the regulatory filings.
“We firmly believe that combining Valeant and Allergan would create an unrivaled platform for growth and value creation in health care, and we look forward to finalizing and announcing the terms of our proposal shortly,” Valeant said in an e- mail.
Valeant has said its goal is to join the ranks of the world’s five biggest drugmakers, which would mean a market cap of about $170 billion, just ahead of Merck & Co. and behind Pfizer Inc. Valeant’s market cap at Monday’s close was $42 billion, meaning that a deal for Allergan would likely more than double its worth and put it roughly halfway to its goal.
Allergan’s best-selling product is Botox, an injection used for cosmetic procedures and migraines that sold $1.98 billion last year, 32 percent of the company’s sales. It also sells Restasis, a treatment for dry eye syndrome, which generated $940 million.
Allergan’s shares climbed 20 percent in extended trading to $170 at 5:38 p.m. New York time after gaining 6 percent to close the regular session at $142, its highest value since at least 1989, according to data compiled by Bloomberg. The Irvine, California-based company has increased 25 percent in the last 12 months, outpacing a 16 percent gain in the Standard & Poor’s 500 Pharmaceutical Index.
Generic drug companies have been buying up makes of specialty medicines as they seek to diversify their product lines and improve margins. Actavis Plc in February agreed to buy Forest Laboratories Inc. for $25 billion, expanding its brand- drug business, and Mylan Inc. bought the injectable drugs unit of India’s Strides Arcolab Ltd for $1.6 billion.
Fran McGill, an outside spokesman for Pershing Square at Rubenstein Associates declined to comment, as did Bonnie Jacobs, a spokeswoman for Allergan. Laurie Little, a spokeswoman for Valeant, didn’t immediately return a call seeking comment.
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