Actavis Beats Valeant In Bid To Buy Allergan

Allergan has agreed to be acquired by the Dublin-based specialty pharmaceutical firm Actavis in a cash-and-stock deal worth $219 per share or a total of $66 billion. The deal trumps a hostile offer from a partnership between Valeant Pharmaceuticals and the activist investment firm Pershing Square Capital Management that has been trying to acquire Allergan since April.

With Actavis’s offer more than 25% higher than the last one put on the table by the partners, Valeant appears to have walked away from what has been an acrimonious battle. “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,” says Valeant Chief Executive Officer J. Michael Pearson.

Actavis says the deal will create a company with $23 billion in annual revenues coming from a combination of brand-name, generic, biosimilar, and over-the-counter drugs. More than 60 years old, Allergan is best known as the maker of ophthalmic pharmaceuticals and the cosmetic enhancer Botox. Six product “franchises” at the combined company will have between $1 billion and $3 billion in annual sales, the firms say.

The acquisition will create the fastest-growing—at least 10% per year—top 10 pharmaceutical company, according to Actavis CEO Brent Saunders. “This combination doubles the revenue generated by our brands business and doubles the international revenue of the combined company,” he says. It will also spend about $1.7 billion per year on R&D.

Actavis anticipates that it will see at least $1.8 billion in annual cost synergies beginning in 2016. These savings will come on top of a $475 million cost-cutting program that Allergan announced in July. That program included eliminating 1,500 jobs, or about 13% of its workforce, this year. About 650 of the job cuts targeted were at the firm’s R&D facility in Irvine, Calif.

Shareholders and regulators must still approve the proposed transaction. If they do, it is scheduled for completion in the first half of 2015.