The head offices of Valeant Pharmaceuticals International Inc. are seen in Laval, Que., on May 20.CHRISTINNE MUSCHI/Reuters
Allergan Inc., the Botox maker seeking to fend off a hostile takeover by Valeant Pharmaceuticals International Inc., is in active talks with Actavis Inc. on a potential alternative deal, people with knowledge of the matter said.
The discussions may not lead to an agreement, said the people, who asked not to be identified because the talks are private. Allergan, based in Irvine, Calif., said in a filing today that it's in talks with a third party that may lead to merger negotiations, without providing further information.
Allergan has been trying to fend off what's been valued as a $54 billion hostile bid by Valeant. Allergan has called the offer "grossly inadequate" and alleged that the Canadian company would gut its research and development budget and use its cash flow to pay down debt accumulated from previous acquisitions.
Bill Ackman, Allergan's largest shareholder, has been battling the company in court over a plan to oust directors opposed to Valeant's acquisition.
David Belian, an Actavis spokesman, declined to comment. In an interview yesterday, Actavis Chief Executive Officer Brent Saunders also declined to comment directly on whether his company had approached Allergan.
"Allergan is a terrific company with great assets and a great team of people," he said in a telephone interview.
Merger Priority
Mergers remain a priority for Actavis, Mr. Saunders said.
"The best deployment of our cash is in continuing to build out our business, building out our geographic footprint, adding technology to our generics capabilities, building out our branded categories," he said. "It's irresponsible not to invest in the long term. There will be a time where share buybacks or dividends will be a way to return capital to shareholders, but that's not today."
Allergan shares climbed 1.2 per cent to $198.57 at 9:40 a.m. in New York, exceeding Valeant's current cash-and-stock offer of about $180. The Laval, Que.,-based company has said it's prepared to raise its bid to at least $200 a share to win support from Allergan's board.
Actavis first approached Allergan about a takeover in August, a person familiar with the matter has said.
Now the companies' active talks reduce the chance that either will become a suitor for Salix Pharmaceuticals Ltd., people with knowledge of the matter said. Both Actavis and Allergan have held talks to acquire Salix in recent months, people with knowledge of the matter have said. Those talks are now on hold, two people said.
Shares Drop
G. Michael Freeman, a spokesman for Salix, didn't immediately respond to phone and e-mail messages requesting comment. Shares of the Raleigh, N.C.,-based company dropped as much as 3.7 per cent to $134.40.
Valeant has said it's seeking to buy Allergan to expand its portfolio and become one of the world's largest drugmakers. The company formed a joint venture with Ackman's Pershing Square in February to acquire a 9.7 per cent toehold in Allergan before going public with its acquisition plans a few months later.
The move has led to a legal battle between Ackman and Allergan over how and when shareholders will vote on the billionaire hedge-fund manager's proposal to replace board members with directors who favor a deal with Valeant. Yesterday a judge ruled that Ackman will be allowed to vote his 10 percent stake in the company when stockholders meet on Dec. 18.
Allergan had accused Ackman of potentially violating insider trading rules and sued to stop him from voting with his shares. A federal judge in Santa Ana, Calif., ruled in Ackman's favor.
Valeant sold rights earlier this year to some skin-care products to Nestle SA for about $1.4 billion as part of a plan to clear potential antitrust hurdles for a deal with Allergan, whose Botox anti-wrinkle products make up about a third of revenue.