|Valeant CEO J. Michael Pearson|
Valeant ($VRX) CEO J. Michael Pearson has said he's confident Allergan ($AGN) shareholders will vote in support of his company's hostile bid come December. But it never hurts to have a little insurance.
The Canadian pharma and its activist investor partner Bill Ackman plan to boost their takeover offer by $15 a share, The Wall Street Journal reported Tuesday. That could value the Botox-maker at more than $56 billion--a $4.5 billion increase.
As sources told the Journal, the move is in part meant to encourage hedge funds and other event-driven investors to pick up more Allergan stock before Oct. 30, the cutoff for determining who gets a say at the California drugmaker's special meeting. There, eligible shareholders will have the opportunity to preserve Allergan's current board or send 6 members packing in favor of a new slate--likely more deal-friendly--put forth by Ackman.
It could also keep Allergan from inking a rival deal--which, according to Reuters, could soon be in the works. Actavis ($ACT), which Allergan rebuffed last month when it was going after North Carolina's Salix ($SLXP), is planning to reapproach the Irvine, CA-based pharma.
Both potential deals for Allergan have their strong points, Leerink Partners analysts Jason Gerberry and Seamus Fernandez pointed out in a Wednesday note to investors. While they look comparable in terms of accretion, an Actavis combo would make a "less compelling cost-cutting story" compared with Valeant.
On the other hand, however, a combined Actavis-Allergan company would "unite two of the best marketing organizations in pharma," and the analysts see "less risk to Allergan brands suffering through the consolidation process."
Ultimately, the pair hands Actavis a slight edge, given Allergan's apparently negative attitude toward Valeant and the New Jersey pharma's potential willingness to outbid. Rumor has it, Allergan would consider a takeover proposal that values it above $200 per share; Valeant's offer, however, wouldn't hit that mark. A $15 bump would bring it to about $191 per share based on Valeant's closing price Tuesday, the WSJ notes.
"We believe ACT has a favorable chance of winning if it puts forward an offer of $200/shr (50% cash), as we are skeptical VRX will enter into a bidding war given the company's historical value-approach to M&A," Gerberry and Fernandez wrote. "... While we wouldn't rule out a higher bid given the exceptional circumstances associated with this deal, we would view it as unusual for VRX to get into a public bidding war."
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Editor's note: This story has been updated with information from a Leerink Partners investor note.