That was fast.
Just a few hours after Allergan confirmed that it was in buyout talks for hot target Shire, it said it didn’t intend to make an offer.
Allergan had to 'fess up to its deal interest under U.K. takeover rules, which stipulated that the Botox maker either put up an offer or walk away by May 17. Investors didn’t take too kindly to the news that Shire was in its sights—and apparently, it didn’t take the Dublin drugmaker long to decide which option it preferred, either.
"After today it is clear investors/we do not want to see a SHPG deal," RBC Capital Markets analyst Randall Stanicky wrote of Allergan, adding that "the takeaway was clear in that there would have been significant push-back to a deal."
That’s not to say Allergan won’t be in the mix for deals going forward. The company has been a major player at the dealmaking table for years now, so it’s no surprise it would look to M&A to help it get out of its current share-price slump, brought on in part by generic threats to lead sellers Botox and Restasis.
"We suspect there is a 'look at everything' dynamic," Stanicky wrote, calling it "prudent/understandable."
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Allergan, for its part, said in a statement that it "continues its ongoing process of evaluating a full range of potential strategic actions that will create value for shareholders, such as divestitures, combinations and acquisitions."
Wells Fargo analyst David Maris, though, predicted that "especially after today’s stock reaction, we would assume that the 'acquisitions' part of that review will likely take a much more diminished role."
Meanwhile, the pullout is likely reassuring for Takeda, which was the first to publicly declare its interest in a Shire pickup when it made an announcement last month. Since then, it’s made three unsuccessful bids for the rare-disease specialist—the latest checking in at more than $60 billion—and analysts have raised concerns that Takeda will have to rely more heavily on equity if it wants to take the offer higher.
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“Takeda knows Shire shareholders want less equity, but stated it intends to keep its investment grade and dividend. Thus, we suspect the cash component is inherently stretched already (4-4.5x leverage on our estimates),” Bernstein analyst Ronny Gal wrote to clients on Thursday.
“Takeda may be willing to go a bit further,” Gal added, “but it is fair to see the deal being consummated as reasonably risky (for a declared deal).”
And Allergan’s withdrawal doesn’t mean there aren’t other companies that might be looking to swallow Shire. Industry watchers have floated Pfizer, Amgen and AbbVie as drugmakers that might be giving the biotech a hard look.