We thought Actavis ($ACT) had a love triangle going with potential merger partners Warner Chilcott ($WCRX) and Valeant Pharmaceuticals ($VRX), as an analyst dubbed it earlier this week. Now, news emerges that it's more like a love quadrangle, with rejections on two sides.
Actavis reportedly turned down a buyout bid from rival generics maker Mylan ($MYL) last week. Bloomberg's sources said Mylan had offered $120 per share in cash and stock, valuing Actavis at about $15 billion. Like many suitors, Mylan stepped forward after it found out someone else--Valeant--wanted Actavis for itself.
But Actavis has decided, at least for now, to pursue its own courtship. Since merger talks with Valeant fell apart at the end of April, the company has turned its attention to a $5 billion-plus deal for Warner Chilcott. It's prepared to move quickly, too, an anonymous source told Bloomberg; a deal could be set within a couple of weeks.
Each of the three potential deals had its own rationale. By buying Actavis, Valeant could have moved quickly and deeply into generic drugs and added Actavis' small list of brands to its own lineup. Mylan and Actavis would together be a generics behemoth at a time when the copycat drug business is consolidating for economies of scale, manufacturing capacity and geographic reach. And Actavis' proposed Warner purchase would combine two complementary product portfolios, giving Actavis a broader women's health business and some bench depth in dermatology.
Reuters says Mylan has dropped out of any bidding for Actavis because the latter's stock price has already risen above its $120-per-share offer. Actavis shares closed at $121.68 yesterday. The notoriously cheapskate Valeant could, theoretically, come back with a higher price, but if Actavis is as intent on the Warner deal as it seems to be, the price might have to be much higher than its previous $13 billion bid.
Cannacord Genuity analyst Randall Stanicky figures an Actavis buyout is now too rich for Mylan or Valeant. "We don't think the numbers make enough sense for either Mylan or Valeant to pursue Actavis at these levels," Stanicky said in an investor note, adding that his firm now puts the odds of an Actavis-Warner deal at 75%, rather than its previous 65% bet. And Stanicky raised his price target on Actavis to $136.
Special Report: Top Biopharma M&A Deals - 2012