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 Allergan, which has repeatedly rejected offers from Valeant
Pharmaceuticals International Inc <VRX.TO>, would consider a
takeover proposal that values the company at above $200 per share,
some of these people said.
Actavis, which held informal conversations with Allergan in recent
months about a possible combination, would like to take a hard look
at buying the company and could reach out to its management team as
soon as this week to reiterate its interest, one of the sources
said.
There has been no formal engagement between the two companies yet,
the sources said, asking not to be named because the matter is not
public.
Actavis' new overture would come as Valeant and its partner William
Ackman plan to boost their offer by about $15 per share, valuing
Allergan at more than $190 per share, according to a separate person
familiar with the matter.
Valeant had initially intended to announce a higher bid after
reporting what it expects to be blow-out earnings on Oct. 20, the
person said, adding that the timing and amount of the bump could
still change.
Allergan, while fighting off Valeant's advances, did not reach out
to other alternative buyers and instead focused on identifying
opportunities for revenue growth and cost cuts internally. But it is
aware of competing interest from other drugmakers, particularly from
Actavis, the sources said.
The emergence of Actavis as a serious rival suitor adds another
twist to the months-long takeover battle between Valeant and
Allergan. The Canadian drugmaker's bid already has attracted
controversy because it is backed by activist investor Ackman,
leading to a legal challenge from Allergan which has accused the two
parties of insider trading.
Shares of Allergan ended 1.7 percent higher at $186.20 on the New
York Stock Exchange after rising more than 3 percent on the news,
valuing the company at more than $55 billion. Actavis closed at
$243.39 for a market capitalization of roughly $64 billion.
Shares of Valeant fell 2.5 percent, putting the value of its
existing cash and stock offer for Allergan at $175.94 per share, or
$52.8 billion based on shares outstanding.
Valeant expects its shares to rise substantially when it announces
earnings in the coming weeks, potentially making its newly increased
offer worth well above $195 per share and close to $200, one person
familiar with the matter said.
Analysts have an average price target of around $200 per share for
Allergan, with the price ranging from $174 to $240 per share,
according to a Thomson Reuters poll of 16 analysts.
Representatives for Allergan and Actavis declined to comment.
Actavis' continued pursuit of Allergan comes as the takeover target
faces a Dec. 18 special shareholder meeting, at which top Allergan
investor Ackman's Pershing Square Capital Management hopes to
replace a majority of the company's board.
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Pershing Square has teamed up with Valeant to pursue a takeover of
Allergan, and is hoping to install new board members who could be
more receptive to a takeover by the Canadian drugmaker.
Actavis, which regularly reviews potential acquisitions, considers
Allergan as the best opportunity currently and is hoping to engage
in friendly discussions, the sources said.
Industry executives have said Actavis would be a better cultural fit
for Allergan because the companies' respective chief executives,
Brent Saunders and David Pyott, believe in focusing on research and
development, while Valeant CEO Mike Pearson is known for cost
cutting.
A large part of Allergan's business is ophthalmology, an area that
Saunders is familiar with after serving as CEO of Bausch & Lomb.
Valeant acquired Bausch & Lomb last year.
DEFENSIVE ACQUISITION UNLIKELY
Valeant and Pershing Square offered to buy Allergan on April 22 but
Allergan has said the offer undervalued the company. Since then
Allergan has announced cost cuts and said it was looking for
acquisitions while trying to persuade shareholders they were better
off remaining independent.
But the possibility of Allergan making a potentially large
acquisition has faced significant opposition from shareholders who
feared such a deal would make the company too big and expensive for
Valeant.
Allergan had held on and off discussions with Salix Pharmaceuticals
Ltd <SLXP.O> about buying the drugmaker for more than $10 billion in
cash, people familiar with the matter said previously. A cash
takeover would not have required a shareholder vote and could have
put Allergan out of Valeant's reach.
Those discussions stalled in part because Allergan considered
Salix's valuation as high, and while the company continues to look
at other deal opportunities, the likelihood of it striking a big
acquisition before the Dec. 18 shareholder meeting is low, the
sources said.
(Reporting by Soyoung Kim and Nadia Damouni; additional reporting by
Caroline Humer; Editing by Richard Chang, Lisa Shumaker and Stephen
Coates)
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