M&A spotlight: Allergan plots cost cuts to ward off Valeant, AbbVie may have to raise Shire bid--again

Allergan CEO David Pyott

Allergan ($AGN) can't stop Valeant ($VRX) from attempting to round up enough support to call a special meeting, overturn its board and strike its takeover defenses. But it can make moves it believes will convince shareholders it's better off standing on its own two feet.

The Irvine, CA-based drugmaker is planning a broad restructuring plan that involves shelving unpromising pipeline candidates, cutting costs and overhauling management incentives, sources told Bloomberg. Allergan is set to outline the revamp blueprints during its earnings announcement later this month.

The moves would fall in line with CEO David Pyott's pledge to give shareholders "most of what they want" in lieu of the $53 billion offer Valeant has taken to shareholders. As Reuters reported last week, the company also may take on debt for a share buyback, and many have speculated that Allergan could make a move to acquire a foreign company, like Ireland-based Shire ($SHPG), that could help lower its tax rate.

But the window on a Shire play could be closing quickly, with AbbVie ($ABBV) Tuesday making its fourth bid for the rare-disease-focused drugmaker. Some analysts, though, say the revised $51.6 billion offer may not be enough to ink an agreement, considering the tax benefits a Shire buyout would bring.

"I definitely don't think it's enough to get the deal done," Credit Suisse analyst Vamil Divan told Bloomberg. Shire's foreign tax domicile is "a critical component that gives them a little more power."

As Barclays analyst Mark Purcell told the news service, acquiring Shire and redomiciling to the U.K. would save Illinois-based AbbVie $1.3 billion by 2020, cutting down its tax rate to 13% from the current 22%. And for that reason, RBC Capital Markets analyst Douglas Miehm, for one, told Bloomberg he thinks AbbVie will have to raise its bid from £51.15 a share to at least £55.

- get more from Bloomberg here and here

Special Reports: Pharma's top 10 M&A deals of 2013 | The most influential people in biopharma today - J. Michael Pearson - Valeant | 15 Highest-Paid Biopharma CEOs of 2013 - Richard Gonzalez - AbbVie

Suggested Articles

Turns out Procter & Gamble didn’t want Pfizer’s consumer health unit after all. But it did want Merck KGaA’s.

Private equity firm, in exclusive talks with Sanofi, says it'll invest to pump up Zentiva into an "independent European generics leader."

With suitor Takeda circling Shire, the Dublin-based target has pulled off a deal of its own.