Pharmaceutical company Allergan is still showing no signs of going quietly.
Bill Ackman and fellow pharmaceutical company Valeant have once again raised their bid for the company, continuing a saga that has gone on since April, when Ackman and Valeant first announced that they would try to acquire Allergan.
This is the second time the duo have raised their bid, bringing it up to $US191 a share or $US56 billion in cash from the original bid of $US177 a share or $US47 billion.
A lack of significant movement in both Valeant and Allergan’s stocks after this announcements suggests that the market isn’t convinced this is the final move. There are a bunch of serious questions lingering about how much Valeant can pay, what the law will allow given the way this deal was structured, and whether or not some other pharmaceutical company might come in and ruin the party for Ackman and Valeant.
First thing’s first — can Valeant afford to go higher?
In an interview on Bloomberg TV Ackman said in no uncertain terms that Valeant CEO Mike Pearson would not overpay for the company.
“As much as an Allergan shareholder, you would say, oh, I want the acquirer to overpay for me, when your acquirer is paying in stock, what you want them to do is you want them to overpay for you they day they buy you and thereafter, never overpay for anything again,” he said. “And the problem is it doesn’t work that way. The CEO is prepared to pay for you is a CEO whose stock you do not want to own an interest in. And I think what Mike is saying, I think what he has demonstrated is that being a disciplined acquirer, offering full and fair value but not overpaying, has enabled him to do 100-odd transactions over six years.”
But at a certain point, this deal will become to expensive for Valeant, and it could be that Allergan is counting on that. From the beginning Allergan has pushed Valeant away arguing that it has no real growth, that it merely cuts research and development from the companies it acquires and sells their popular products — in Allergan’s case Botox, for example — at a lower price, boosting sales without really boosting profits.
In the meantime, Allergan is challenging the entire deal in Court. Its latest attempt to shut the deal down happened earlier this week, when it filed a motion in California that would not allow Ackman to vote his 10% share in Allergan at December’s shareholder meeting.
Ackman acquired 10% of Allergan before announcing that he was teaming up with Valeant to do this deal — the first time a hedge fund and a company ever teamed up to do a corporate takeover. Regulators are investigating whether or not there was insider trading involved there, and Allergan is suing Valeant and Ackman on the same basis.
While all of this is going on, there’s still the possibility that another buyer interested in Allergan — one without the legal issues or the controversy surrounding its profit — could step into the game.
According to Reuters, Actavis is talking to Allergan about possibly buying the company. Nothing formal has been offered, but given how difficult Allergan is making this deal for Ackman and Valeant, the fact that talks are happening at all isn’t the surprising. Activis could be Allergan’s white knight.
And Allergan’s white knight is Bill Ackman’s headache.
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