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Will Allergan scramble for Shire to beat off Valeant's hostile advance?

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Valeant CEO J. Michael Pearson

Valeant ($VRX) has been promising a hostile takeover approach for Allergan ($AGN) since the company's board unanimously shot down its $53 billion cash-and-stock bid. And now, it's made its first move.

Friday, the Canadian M&A giant began a tender offer to acquire shares of Allergan, offering the Botox maker's investors $72 in cash and 0.83 Valeant shares for each Allergan share.

"We believe Allergan's stockholders should have the opportunity to express their views and we are confident that Allergan's stockholders will support this combination," Valeant CEO J. Michael Pearson said in a statement.

Of course, Valeant can't actually acquire more than 10% of the stock thanks to Allergan's poison pill plan. But as The Wall Street Journal notes, the move is likely an effort to drum up pressure on the company's board; it's also coupled with takeover partner Bill Ackman's attempt to cue a special meeting to replace a majority of Allergan's directors with a slate that could nix the pill defense.

All of this has left Allergan somewhat in the lurch, increasing speculation that a play for Shire ($SHPG) is imminent. Rumors have swirled for weeks that Allergan could approach the Irish drugmaker--which has rebuffed it once already, pre-Valeant offer--in search of a lowered tax rate that could negate a main benefit of Valeant's acquisition plan.

But aside from helping Allergan dodge Valeant, a deal between the two wouldn't make much sense, Deutsche Bank analyst Mark Clark told Bloomberg. The only potential area of overlap between the two is in eye diseases, with Shire last month announcing plans to apply for FDA approval of its dry eye treatment.

Bill Ackman

If that candidate doesn't make it to market, "there is next-to-zero industrial logic in Allergan acquiring Shire, as they operate in very different fields," Clark told the news service.

Shire, a perennial M&A target thanks to its Irish domicile and rare-disease focus, is ready to ward off its own unwanted advances. Tuesday, Reuters reported the company had brought on Citi to help it defend against hostile suitors.

And then there's the wrench Ackman could throw into any Allergan pickup plans: His Pershing Square Capital Management is Allergan's largest shareholder, boasting a 9.7% stake.

"The fact that Allergan's largest shareholder is agitating for a Valeant takeover strongly suggests it would not support a spoiling move by Allergan," Clark told Bloomberg. "I wouldn't hold my breath."

- read Valeant's release
- see the Bloomberg story
- get more from The Wall Street Journal (sub. req.)

Special Reports: Pharma's top 10 M&A deals of 2013 - Valeant/Bausch + Lomb | The most influential people in biopharma today - J. Michael Pearson - Valeant

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