Actavis plc and Allergan, Inc. have entered into a definitive agreement under which Actavis will acquire Allergan for approximately $66 billion in a cash-and stock deal. The transaction, which is subject to shareholder approval and customary closing conditions, has been unanimously approved by the boards of directors of Actavis and Allergan and is supported by the management teams of both companies. The agreement follows an unsuccessful effort by Valeant Pharmaceuticals International to acquire Allergan, with its most recent effort being a takeover bid for approximately $53 billion in which Allergan shareholders were scheduled to vote on in mid-December. 

Under the deal between Actavis and Allergan, Activis is offering a combination of $129.22 in cash and 0.3683 Actavis shares for each share of Allergan common stock. Based on the closing price of Actavis shares on November 14, 2014, the transaction is valued at approximately $66 billion, or $219 per Allergan share. According to the companies, the combination will create one of the top 10 global pharmaceutical companies by sales revenue, with combined annual pro forma revenues of more than $23 billion anticipated in 2015.

The combined company will be led by Brent Saunders, CEO and president of Actavis, and Paul Bisaro will remain as executive chairman of the board of Actavis. The integration of the two companies will be led by the senior management teams of both companies, with integration planning to begin immediately in order to transition rapidly to a single company. Additionally, two members of the Allergan board of directors will be invited to join the Actavis board of directors following the completion of the transaction. The transaction is subject to the approval of the shareholders of both companies, as well as customary antitrust clearance in the US, the EU, and certain other jurisdictions, and is anticipated to close in the second quarter of 2015.

“This acquisition creates the fastest growing and most dynamic growth pharmaceutical company in global healthcare, making us one of the world's top 10 pharmaceutical companies,” said Brent Saunders, CEO and President of Actavis, in a company statement. “We will establish an unrivaled foundation for long-term growth, anchored by leading, world-class blockbuster franchises, and a premier late-stage pipeline that will accelerate our commitment to build an exceptional, sustainable portfolio. The combined company will have a strong balance sheet, growing product portfolios, and broad commercial reach extending across 100 international markets. Our combined experienced management team is dedicated to driving strong organic growth while capturing synergies and maintaining a robust investment in strategically focused R&D.”

The acquisition expands Actavis’ specialty brand portfolio and its presence in international markets. “With pro forma revenues in excess of $23 billion anticipated in 2015, this combination doubles the revenue generated by our brands business and doubles the international revenue of the combined company,” said Saunders in the release. “Management is committed to maximizing the potential for the combined company to drive industry-leading top and bottom line growth. With this combination, we plan to transform the growth profile of our pharmaceutical business and have the ability to generate organic revenue growth at a compound annual growth rate of at least 10% for the foreseeable future.” 

Paul Bisaro, executive chairman of Actavis said in a release. “This combination will greatly enhance our US and international commercial opportunities. In the US, the combination makes us more relevant to an even broader group of physicians and customers. Overseas, it will enhance our commercial position, expand our portfolio and broaden our footprint in Canada, Europe, and Southeast Asia, and other high-value growth markets, including China, India, the Middle East, and Latin America.”

The addition of Allergan's portfolio, including multiple blockbuster therapeutic franchises, doubles the revenues of Actavis' North American Specialty Brands business. On a pro forma basis for full year 2015, the combined company will have three blockbuster franchises each with annual revenues in excess of $3 billion in ophthalmology, neurosciences/central nervous system, and medical aesthetics/dermatology/plastic surgery. The specialty product franchises in gastroenterology, cardiovascular, women's health, urology,and infectious disease treatments will have combined revenues of approximately $4 billion.

Actavis projects that the transaction will generate at least $1.8 billion in annual synergies commencing in 2016, in addition to the $475 million of annual savings previously announced by Allergan in connection with Project Endurance. Actavis also plans to maintain annual R&D investment of approximately $1.7 billion. The combined company will have approximately $5 billion in pro forma 2015 international revenue. Together, Actavis and Allergan will have a commercial presence across 100 markets, including an enhanced presence across Canada, Europe, Southeast Asia, and Latin America and a strong footprint in China and India.The combination is expected to add approximately 15 projects in near- and mid-term development to Actavis' development portfolio.

In response to the companies’ announcement of a proposed acquisition, Valeant said that it will no longer pursue Allergan. “We have seen the announcement that Allergan and Actavis have made, and while we will review any such agreement in determining our course of action, Valeant cannot justify to its own shareholders paying a price of $219 or more per share for Allergan,” said J. Michael Pearson , chairman and CEO of Valeant, in a company statement. “Our business is performing extremely well as evidenced by our third quarter results, our expected strong fourth quarter, and our robust outlook for 2015, and I am confident in our continued ability to generate exceptional shareholder value. We will remain focused on delivering strong organic results and evaluating acquisition opportunities as we always have: prudently, in a disciplined manner, and in the best interests of our shareholders.” 

Source: Actavis and Allergan and Valeant Pharmaceuticals