Latest Allergan buzz puts Ireland's Jazz in its dealmaking sights

Allergan's Irvine, CA, headquarters--Courtesy of Coolcaesar, Creative Commons (CC BY-SA 3.0)

Forget Salix Pharmaceuticals and long-gone Shire. No. 1 on Allergan's list of defensive acquisition prospects could be Ireland's Jazz Pharmaceuticals ($JAZZ).

The Dublin drugmaker is the most viable option for Allergan ($AGN), which hopes a pickup of its own will thwart a hostile takeover attempt from Valeant ($VRX), three industry bankers told dealReporter (as cited by Benziga).

Jazz, with its tax-advantaged Irish address, could be the lifeline Allergan's been looking for. Analysts have long said bulking up could help the Botox-maker fend Valeant off, and a lowered tax rate would negate one of the proposed benefits of a merger with the Canadian drugmaker.

That's not to mention Jazz's own merits, which include some of the best profit margins in the drug industry. The tiny company has been beefing itself up lately, too; in December it paid $1 billion to buy Italy-based Gentium in a deal analysts said could make Jazz a more attractive target.

But plenty of rumors have been flying since Valeant CEO J. Michael Pearson's deal machine made its first bid for Allergan this spring. First in the spotlight was Ireland's Shire ($SHPG), which AbbVie ($ABBV) quickly moved in to snap up in July. More recently, a potential move for North Carolina's Salix ($SLXP) had industry-watchers abuzz.

And to say Jazz is a rumor-mill regular would be an understatement. The specialty pharma, which makes the narcolepsy treatment Xyrem, has long made the list of pharma's perennial takeover targets, though so far, it's survived the industry's tax inversion frenzy.

Still, speculation fueled a 7% rise in Jazz' stock price Friday, and thanks to Ireland's buyout rules, it may not be long before we know if the two parties really are engaged in M&A talks.

As Sterne Agee analyst Shibani Malhotra wrote in a note to clients, the Irish Takeover Panel's rules require that an announcement regarding the offer be made in the event of an "anomalous movement in share price."

"In our view there should be further clarity in the next few business days with either a disclosure confirming takeover talks or a lack of an announcement following what appears to be an Irish Takeover Panel disclosure triggering event," he wrote.

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