Ackman and Valeant bid $45.6 bn for Botox maker

Hedge fund mogul William A Ackman and Valeant Pharmaceuticals International announced a $45.6-billion takeover offer on Tuesday for the maker of Botox, Allergan, in an unusual pairing of activist investor and corporate buyer that could reshape the deal landscape.

Under the terms of the bid, Valeant would pay $48.30 a share in cash and 0.83 of one of its shares for each Allergan share. At Monday's closing price, the offer is worth about $152.89 a share, 31 percent above what they called Allergan's unaffected stock price of $116.63.

Ackman's firm, Pershing Square Capital Management, has already disclosed owning a 9.7 per cent stake in Allergan.

Valeant said the proposed merger would create a powerhouse in the eye care, dermatology and cosmetic drug businesses. The company, a serial acquirer whose deals included the $8.7 billion takeover of Bausch & Lomb last year, would gain control of popular treatments like Botox, Latisse eyelash enhancer and a lap-band device.

"This proposal represents an undeniable opportunity to create extraordinary value for both Allergan and Valeant shareholders by establishing an unrivaled platform with leading positions in ophthalmology, dermatology, aesthetics, dental and the emerging markets," J Michael Pearson, Valeant's chairman and chief executive, said in a statement.

Ackman added: "The combination of Valeant and Allergan represents the most strategic and value-creating transaction I have ever analysed. I strongly urge the Allergan board of directors to carefully examine the proposed transaction and enter into negotiations with Valeant so that a merger can be consummated promptly."

VALEANT’S HISTORY OF DEAL-MAKING

Valeant Pharmaceuticals is no stranger to deal-making. The Canadian company, which was forged from the 2010 merger of Valeant and Biovail, is known as a serial acquirer, having spent billions of dollars on companies. The company has also engaged in prominent bids that have failed to result in deals. Here is a sampling of some of its deal-making activities

SUCCESSES

• Bausch & Lomb: Valeant agreed in May 2013 to buy eye care company Bausch & Lomb for $8.7 bn. The deal closed a few months later. Under its terms, Valeant paid $4.5 bn to the investors that owned Bausch & Lomb, led by private equity firm Warburg Pincus, and spent about $4.2 bn to repay the company’s debt
• Medicis: In September 2012, Valeant agreed to spend $2.6 bn for Medicis Pharmaceutical Corporation, a skin care business based in Arizona. The deal was closed that December
• Natur Produkt: The Medicis deal came during a particularly active year for Valeant. Among its acquisitions in 2012, it struck a $180-mn deal for Natur Produkt International of Russia, a cough and cold pharmaceuticals provider

FAILURES

• Actavis: Merger talks between Valeant and another drug maker, Actavis, fell through in April 2013, a person briefed on the matter said at that time. Valeant might have paid more than $13 bn in stock to acquire the company. But not long after the collapse of the talks, Actavis agreed to buy a smaller rival, Warner Chilcott, for about $5 bn in stock
• Cephalon: Valeant unveiled a $5.7-bn hostile bid for Cephalon, a biopharmaceutical company, in March 2011. Cephalon rebuffed the offer as too low and opportunistic and, in May, it agreed to sell itself to Teva Pharmaceutical Industries for $6.8 bn.

Source: NYT

Shares of Allergan were up 16 per cent in mid-morning trading, at $164.63. Valeant, too, got a boost, as its shares rose 5.6 per cent, to $133.15 each.

If successful, the joint bid could provide a new template for how deals are done at a time when activist investors are ascendant. By teaming up with Ackman, Valeant has gained a valuable ally who is experienced in battling recalcitrant corporate boards - and who also controls a large block of the target company's stock.

But the proposed acquisition, the first of its kind, also raises pressing questions about how activists and corporations work together and how companies defend themselves against hostile bidders.

Valeant and Ackman disclosed on Monday that the takeover bid would involve $15 billion in cash, supported by financing from Barclays and the Royal Bank of Canada.

In a statement on Tuesday, Allergan said that its board would review the proposal from Valeant. Goldman Sachs, Bank of America Merrill Lynch and the law firm Latham & Watkins are advising Allergan.

Besides Barclays and RBC, Valeant is receiving advice from the law firms Sullivan & Cromwell; Skadden, Arps, Slate, Meagher & Flom; and Osler, Hoskin & Harcourt.

Ackman's firm is being counselled by the law firms Kirkland & Ellis and Davies Ward Phillips & Vineberg.

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