Allergan Deal Worth $66 Billion

allerganIn a deal worth $66 billion, Actavis has announced that it has agreed to buy Allergan for $219 per share. Allergan is the pharmaceutical company known mostly for manufacturing the wrinkle treatment, Botox, as well as the well-publicized dry eye reliever, Restasis. The deal comes after six months of dancing around a hostile takeover attempt by Valeant Pharmaceuticals and Pershing Square Capital Management, a hedge fund of Mr. William A. Ackerman. The acquisition of Allergan by Actavis has contributed to the fast growth of that company, and has made Actavis one of the top 10 pharmaceutical companies in the world.

The last offer Valeant Pharmaceuticals and Pershing Square Capital Management made for Allergan on October, 27, 2014, had been $200 per share, or $60 billion. Allergan’s refusal to allow itself to be taken over by Valeant Pharmaceuticals and Pershing Square Capital Management was based on worries that they would taper down that companies commitment to development and research. The $66 billion deal between Allergan and Actavis has prompted Valeant Pharmaceuticals and Pershing Square Capital Management to state that they do not think that Allergan is worth $219 a share. In a statement by the CEO and chairman of Valeant Pharmaceuticals, J. Michael Pearson, he clarifies that his company cannot rationalize the expenditure of $219 per share.

As well as acquiring the company known mostly for making Botox, Actavis will also be taking over Allergan’s dermatology, ophthalmology and neurosciences businesses. Actavis is hoping to combine their own women’s health and gastrointestinal franchises with Allergan’s businesses in order to reach $23 billion in projected revenue. Actavis is also expecting to save $1.8 billion beyond the $475 million in savings that Allergan has already cut from its budget this year, including the $1.7 billion it spent on research and development of products, by combining the separate businesses.

The deal between the two health care companies may be worth $66 billion, or $219 a share, but it is only the third biggest health care takeover in the United States. However, in a year full of grand deals and takeovers, the $66 billion deal is overshadowing the technical takeovers of DirecTV by AT&T for $48.5 billion and Time Warner cable by Comcast for $45 billion. However, due to the fact that last year Actavis attained Warner Chilcott, an Irish maker of drugs, and moved its head offices abroad, they are not held to the new rules passed in Washington, D.C. this past September. The new rules have made it harder for companies to move overseas in order to evade paying taxes while doing business in the United States.

This fact has allowed Actavis to use the acquired companies’ cash from abroad to help boost the financial side of the $66 billion deal at $219 a share, and also allows Actavis to pay less tax on Allergan’s overseas sales. Actavis had already had some practice flexing their financial muscles as an Irish business when it gained Forest Laboratories, another of its Irish companies. Actavis has openly stated that it would be paying only about 15 percent in taxes after the deal was done, which was way below what the corporate tax rate is in the United States. The combining of Allergan and Actavis is expected to bring in $23 billion in revenue in 2015, with an annual cost savings of $1.8 billion. As for the continuation of the research and development within the united company, CEO of Actavis Brent Saunders states that they are committed to research and development, and that it is the very lifeblood of their company.

By Korrey Laderoute

Sources:
USA Today
The New York Times
Reuters
The New York Times

Microscope image by Tulane Public Relations – License

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