Actavis officially steals Allergan from Valeant with $66B buyout

With Actavis ($ACT) and Allergan's ($AGN) deal agreement, the Botox maker is getting what it's wanted for months--a way to thwart hostile bidder Valeant. And Actavis? It's getting a glimpse of a future that holds $23 billion in annual revenue, and that would officially punch its ticket into Big Pharma.

Actavis CEO Brent Saunders

As the companies announced Monday morning, Actavis has agreed to fork over about $219 per share, in cash and stock, for Allergan. That makes the deal worth about $66 billion, based on Actavis' closing price Friday. And it's a price Valeant ($VRX) CEO J. Michael Pearson said in a statement that he "couldn't justify."

Actavis CEO Brent Saunders, on the other hand, called the transaction--$129.22 in cash and 0.3683 Actavis shares for each share of Allergan--"financially compelling." Saunders cited doubled 2015 revenues in the company's branded drug business, "strong free cash flow" of more than $8 billion by 2016, and a compound annual growth rate "of at least 10% for the foreseeable future."

While Valeant has been the one touting plans to crack the list of the world's top 10 drugmakers, it's now Actavis that's on its way there. With $23 billion in predicted 2015 sales, it would displace Eli Lilly ($LLY) in the No. 10 spot; while the Indianapolis drugmaker brought in $23.1 billion last year, it is forecasting $19.4 billion to $19.8 billion for 2014, thanks to patent expirations. "This is going to be a Big Pharma," Sanford C. Bernstein analyst Ronny Gal recently told The Wall Street Journal.

Significant forays into the branded drug business have helped Actavis get there. The company, which started out in generics, within the past two years sealed deals with Warner Chilcott and Forest Laboratories, both of which brought over a chunk of branded drug revenue and some pipeline prospects.

This time, Actavis will gain Allergan's blockbuster ophthalmology, neurosciences and medical aesthetics/dermatology franchises, which it said will complement the CNS, gastroenterology and women's health products it already has in its portfolio.

Allergan CEO David Pyott

As for Allergan, it can now rest assured that R&D-averse Pearson won't be taking his ax to the Allergan research budget, a prospect the company used to defend itself against the deal. Instead, "we are combining with a partner that is ideally suited to realize the full potential inherent in our franchise," CEO David Pyott said in a statement. "Together with Actavis, we are poised to extend the Allergan growth story."

- read the Actavis/Allergan release
- read Valeant's release

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