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Should AGN Just Take the Offer From Bill Ackman and VRX?

Here's everything investors need to know about the Valeant Pharmaceuticals bid for Allergan

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You can say this much about Bill Ackman — there’s never a dull moment when he’s in the picture.

AGN VRX allergan valeantBefore the dust even had a chance to settle on the latest Herbalife (HLF) hullabaloo, his effort to facilitate the Valeant Pharmaceuticals (VRX) acquisition of Allergan (AGN) has inspired a lawsuit.

Neither AGN stock nor VRX stock moved a great deal after Allergan filed the suit last Friday. But, the whole thing has the potential to push both stocks around … and not necessarily a way in which current shareholders of either company will like.

What’s Going on Between VRX and AGN?

Before diving into any of the stocks involved, you’ll need some background.

The saga actually started way back on April 22 when Valeant Pharmaceuticals offered to buy Allergan for $47 billion, a 31% premium, mostly to get its hands on Allergan’s Botox business, which produces just less than $2 billion in revenue per year. The specific offer was $48.30 in cash for every share of AGN, plus 0.83 shares of VRX.

That in and of itself wasn’t an unusual bid. What was unusual is how it seemed to be spurred by Bill Ackman, manager of hedge fund Pershing Square, just a few days after the fund had acquired 9.7% of the target company. A self-serving maneuver, but not an illegal one.

Allergan wanted nothing to do with it. In fact, on the very same day Valeant tipped its hand, AGN swallowed a proverbial poison pill that would prevent Pershing Square from taking on a stake bigger than the 10% he already owned. Still, Ackman already had enough of a stake to start shaking up the board of directors.

Fast forward to May 12, when Allergan officially declined the $47 billion offer from VRX, explaining Valeant’s plans to cut R&D weren’t in the organization’s best long-term interests. The very next day, Valeant reported it would raise its offer, but on the same day, Pershing Square floated the idea of exercising its right to call for a non-binding shareholder vote on the matter (a proxy battle that’s still brewing, by the way).

True to its word, on May 28, Valeant upped its bid for Allergan to $163 per share, then two days later, it upped its offer again to $177. At that price, the offer hit a stunning total of $53 billion, but AGN didn’t budge, rejecting Valeant’s third offer on June 10.

Bill Ackman didn’t quit, nor did Allergan stop looking for ways circumvent a hostile takeover by Valeant.

By early July, Allergan was reported to be mulling a bid to acquire Irish drug manufacturer Shire Plc (SHPG), just to make itself less appetizing for the suitor. AbbVie (ABBV) stepped up to the plate with cash before AGN, however, acquiring Shire in mid-July, pushing Allergan back to square one.

Pershing Square continued to plan its proxy battle while simultaneously planning a non-optional shareholder meeting on the matter. In the meantime, Allergan was planning a new maneuver of its own, unveiling it at the end of last week.

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Article printed from InvestorPlace Media,

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