Activist investor Bill Ackman and his unlikely Canadian partner, Valeant Pharmaceuticals International Inc., unveiled details of their bid for Irvine pharmaceutical company Allergan Inc., which makes the popular Botox wrinkle treatment.
Valeant will offer to pay $48.30 in cash and 0.83 shares of stock in its company for each share of Allergan stock. At Monday's closing price, the deal would be worth about $152.89 per share, or $45.6 billion.
Shares of Allergan were up 14% at about $162.50 Tuesday morning, a sign that investors may want more for the company than Valeant and Ackman are offering.
Valeant disclosed details of the offer Tuesday in a news release.
Under the deal, Allergan shareholders would own 43% of the combined company, Valeant said. Ackman's firm, Pershing Square Capital Management, would accept only stock in exchange for its more than 28 million Allergan shares and intends to "remain a significant long-term shareholder of the combined company," Valeant said.
Allergan has thus far declined to comment on the offer.
"Valeant and Pershing Square believe that the combination of the two companies is extremely compelling for both Allergan and Valeant shareholders and will create an unrivaled platform for growth and value creation in healthcare," Valeant said in the news release.
The combined company would have an "unrivaled portfolio in ophthalmology, dermatology and aesthetics," Valeant said. Last year, Valeant acquired Bausch & Lomb, making it one of the world's leading eye care companies.
Botox generated nearly $2 billion in sales for Allergan last year, but the company is also a leading provider of eye medications, including Restasis, the only prescription medication for the treatment of chronic dry eye.
J. Michael Pearson, Valeant's chief executive, said: "Together, we can capitalize on the inherent strengths and complementary portfolios of our two companies, while achieving significant synergies by applying Valeant's unique operating model to a combined set of assets."
Ackman said: "The combination of Valeant and Allergan represents the most strategic and value-creating transaction I have ever analyzed. 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. "
But one analyst said in an interview that Allergan would likely reject the offer and hold out for a deal worth at least $180 a share.
"I will be very surprised if Allergan does not reject the offer," said Ronny Gal of Bernstein Research.
A buyout offer would "have to come closer to $180 or $190 [a share]. If it gets in that neighborhood, they'll have to have a good reason they don't accept."
Allergan reported $6.3 billion in revenue last year, about $2 billion of that from Botox. Restasis generated about $940 million in revenue. The company generated an additional $378 million from its breast-implant business and $100 million through sales of Latisse, a prescription drug that thickens eyelashes.
"What does Valeant see in Allergan? It sees excellent products," Gal said.