Allergan CEO Brent Saunders looks to have finally found his big buyout partner.
The maker of Botox will be bought by Abbvie in a cash and stock deal valued at about $63 billion, the companies announced Tuesday. The purchase price represents a 45% premium to Allergan’s closing price on Monday. A source close to the matter told Yahoo Finance the talks between the two companies began 6-7 weeks ago and were initiated by Abbvie.
Allergan’s (AGN) stock popped 25% on the news. Abbvie’s stock crashed 15%, likely on fears it’s overpaying for the struggling Allergan.
The deal brings Allergan’s popular Botox under the same roof as Abbvie’s drugs for cancer and arthritis (namely the blockbuster Humira).
"This deal will help alleviate concerns on our reliance on Humira" said Richard Gonzalez, Abbvie CEO, on a conference call with analysts. Gonzalez is expected to run the combined company through 2023, which is when Humira loses exclusivity in the U.S. Saunders will be one of two Allergan execs joining the company’s board of directors.
“This is well received news this morning,” Connor Browne, portfolio manager at Thornburg Investment Management told Yahoo Finance. Thornburg is long Allergan. Browne says he wouldn’t be surprised to see other bidders come into the mix. Others bidders would have to be big pharma players such as Pfizer that could finance such a large transaction.
Saunders hasn’t hidden his desire the past year to sell all of Allergan or unload certain parts. Allergan has struggled to maintain investor confidence amid pressured results due to increased competition in the market for its Botox product. The company has also had some failures in getting once promising drugs from clinical stages to market.
Allergan’s stock has plunged some 47% over the past two years, according to Yahoo Finance data.
“The sense of urgency to create value is high and the Board is actively and continuously reviewing alternative avenues that could unlock value in the near-term. I assure you that the Board, management team and I recognize the urgency and we will take decisive action to drive value-enhancing opportunities,” Saunders told analysts on a May 7 earnings call.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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