m&a , valeant and allergen
TRANSCRIPT
VALEANT PHARMACEUTICALS INTERNATIONAL ACQUISITION ATTEMPT OF ALLERGEN INCORPORATED
THE DEAL – FINANCIALS
Cash/Share – $48.3 and Exchange Ratio – 0.83
• Initially VALEANT offered this amount which valued the company at around $47 billion but after rejection the offer was increased to $49.4/ share which valued the company at $56 billion USD.Ownership:
43% ALLERGAN and 57% VALEANT• VALEANT offered substantial premium of 45%
to ALLERGEN and later it was made public that William Ackman has 9.7% of the shares of ALLERGEN (when he increased his shareholding from 5% to 9.7%)
THE DEAL – THE PARTIES
Deal (dated 22/04/2014)
ALLERGEN
VALEANT
Pershing
Square Capital
Michael PearsonVALEANT
(CEO)
William AckmanPershing
Sq. Capital
David Pyott
ALLERGEN (CEO)
THE DEAL – THE PARTIES…
Canada-based specialty pharma companyFocus on expanding products through acquisitions, with little expenditure on R&D. Known to cut R&D spends of companies it acquiresMade atleast 34 purchases since 2010. Notable takeovers: Obagi Medical Products Inc., Bausch & Lomb and Solta Medical Inc.Market value has risen 848% since 2008 as Valeant emerged as one of the fastest growing pharma companiesHigh leverage and short-term revenue gain orientation has put their strategy under scrutiny
Multi-specialty healthcare company, with flagship products in the areas of eye care, neurosciences, medical dermatology and urologicsHigh R&D focus (17% of revenue), has been fending off acquisition from Valeant, not only on account of undervaluation but also a completely different business model
THE DEAL – VALEANT VS ALLERGAN
THE DEAL – CONTEXT• Following its aggressive acquisition strategy, Valeant has set sight on its biggest deal so far – the takeover of Allergan – a maker of skin products, including Botox. • Allergan Inc. (AGN), the subject of takeover speculation last year when its stock price dipped, would complement Valeant’s interest in skin and eye care• Allergan rejected multiple rounds of offers claiming it was undervalued, while callling Valeant business model unsustainable, refusing to sell at a price lower than $200 per share•While Allergan has not actively sought other bidders, focusing instead on creating shareholder value through cost cuts, the bid has taken dramatic twist with Actavis emerging as a bid rival with its offer of $190 per share
THE DEAL – CONTEXT…• The aggressive strategy for VALEANT can be given as the following: Aggressive acquisition strategy by VALEANT• Together with ALLERGAN, VALEANT would have captured a major portion of the ophthalmologic medicines market. This can be shown by the following info graphic:Rank as per Revenue Company (Sales ‘13)(in billion)
1 Alcon 10.2 USD2 Valeant & Allergen 6.30 USD3 Johnson & Johnson 2.90 USD4 Regeneron 1.60 USD5 Roche 1.50 USD6 Cooper Vision 1.30 USD
THE DEAL – SYNERGIES• Annualized cost synergy opportunity of $2.7 billion USD with revenue synergy and tax savings• The $2.7 billion USD cost synergy included the following components:• $1.8 billion USD on Selling, General and
Administrative Costs (SG&A) which included • Rationalizing US and corporate HQ and
eliminate regional HQ• Decentralization and align to VALEANT
advertising• $0.9 billion USD on R&D cost synergy which
included• Invest on low risk projects• Rationalize R&D infrastructure
• Revenue synergies included• Acceleration of ALLERGAN in emerging
markets• Acceleration of ALLERGEN OTC drugs and
additional product opportunity
THE DEAL – IMPACT ON MARKET
THE DEAL – IMPACT ON MARKET…
THE DEAL – TAKEOVER DEFENSES• Alleged that Valeant’s model is unsustainable• Constant attacks on VALEANT’s business performance to convince the shareholders that their stock is not to be bought • Share buyback to increase the price per share – Flip in poison pill where the investors (shareholders and not the acquirer) has the right to buy shares at a discounted price • Filed Lawsuit against VALEANT citing violations to federal securities laws that prohibit insider trading, fraudulent practices & failure to disclose legally required information.• Pershing Square purchased ALLERGAN stock and
securities valued at $3.2 billion• Even though Valeant established understanding
of non-public takeover intentions
THE DEAL – TAKEOVER DEFENSES…• Acquiring stock damaged value appreciation
worth $1.2 billion• ALLERGAN demands court declaration for
violation of insider trading and disclosure laws for Valeant and Pershing also repealing Pershing Square’s purchase of ALLERGAN shares• ALLERGAN requested preliminary injunction
against Valeant prohibiting VALEANT & Pershing for exercising rights & benefits associated with ALLERGAN shares• ALLERGAN and VALEANT engaged in a bidding
war for the acquisition of SALIX Pharmaceuticals• ALLERGAN brought a White Night, ACTAVIS
Pharmaceuticals for saving it from the unsolicited takeover by VALEANT
THE DEAL – RESULT
THE DEAL – RESULT…April 22: Valeant Proposes to acquire Allergan for $48.30 in Cash and 0.83 Shares of Valeant Stock for Each Allergan Share
May 28: Valeant Substantially Increases Merger Proposal For Allergan
Aug 1: Allergan lawsuit against Valeant, Pershing Square cites securities violations
Sep 24: Valeant threatens suit against Allergan over a potential deal with Salix Pharmaceutical
Oct 8: Actavis plans new merger approach for Allergan Inc at close to $200/share
May 12: Allergan rejects Merger proposal saying it is undervalued
May 30: Valeant And Pershing Square Make Revised Offer For Allergan Contingent On Good Faith Negotiations
Aug 18: Valeant extends expiration of offer to acquire Allergan to December 31 from the original Aug 15
Sep 30: Allergan’s statement “Valeant’s offer is grossly inadequate and substantially undervalues Allergan”
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