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Monica Wolfe
Monica Wolfe
Articles (757) 

Bill Ackman and Valeant Pharmaceuticals Team Up to Take Over Pharmaceutical Company Allergen

April 23, 2014 | About:

Over the past week GuruFocus Real Time Picks reported that Bill Ackman (Trades, Portfolio) made a buy into Allergen (AGN). This is the first buy into the company for Ackman, and he did so in a big way by purchasing a total of 28,878,538 shares of the company’s stock. He bought these shares at the average price of $120.89 per share on April 11, and since this buy the price per share is up 35% to $163.65.

Ackman’s Pershing Square Capital Management has taken a near 10% stake in Allergan over the past couple of months. The fund has now teamed up with the Canadian-based Valeant Pharmaceuticals International (VRX) which is known for its consistent track record in acquiring other companies. Ackman’s activist fund and Valeant have partnered together to purchase Allergan for roughly $46 billion in a cash-and-stock deal, according to Bloomberg.

Ackman began his purchasing of the company’s stock in late February, and in March he switched to over-the-counter call options in order to build up his stake. A buying pause from Ackman on April 9 and 10 lowered the price of the stock, and the Ackman resumed his buying as of April 11.

Ackman’s newest buy represents a 9.7% stake in the company, and this stake includes stock options and a forward contract.

Allergan is a global, technology-driven and multi-specialty health care company which actively pursues therapeutic advances to help patients return to their healthiest states. The company’s flagship franchises are in eye care, neurosciences, medical dermatology and urologics are structured under the company’s pharmaceutical business portfolio, Allergan Pharmaceuticals.

In 2006, Allergan added breast aesthetics and dermal fillers to its business portfolio by acquiring the company, Inamed Corporation. These additions came together to create the company’s medical aesthetics franchise. These products are now represented within the Allergan Medical corporate division.

The acquisition of Allergan by Valeant Pharmaceuticals would mean the combining of two mid-sized pharmaceutical companies that focus on skin- and eye-care products and solutions. Bloomberg also notes that Valeant has been on a buying spree since it acquired Bausch & Lomb last May.

Since Ackman’s Pershing Square began buying Allergan in February, the fund has already spent nearly $4 million, making it the fund’s largest investment to date.

Allergan’s historical revenue and net income:


The GuruFocus analysis on Allergan reports that the company has seen predictable revenue and earnings growth, its operating margin is expanding, and its price is sitting near a 10-year high.

The company announced via press release on Monday, that it had been made aware of the public filings made by Valeant Pharmaceuticals International and Pershing Square Capital Management regarding Valeant’s intention to merge the two companies. The press release states that Allergan’s Board of Directors are evaluating the offer for the company and if successful it will then go to the stock holders of Allergan stock. You can read this press release here.

On April 22, Allergan reported that they had received a proposal from Valeant to acquire all the outstanding shares of the company for a combination of 0.83% of Valeant common shares and $48.30 in cash per share of common stock of the company. Read more about this proposal here.

Most recently Allergan adopted a one-year stockholder rights plan. You can read about it here.

As of the most updated information, there are twelve gurus that maintain a position in the company. Check out their holding histories here.

Allergan has a market cap of $48.84 billion. Its shares are currently trading at around $163.65 with a P/E ratio of 50.20, a P/S ratio of 7.84 and a P/B ratio of 7.40. The company had an annual average earnings growth of 15.50% over the past ten years.

GuruFocus rated Allergan the business predictability rank of 3-star.

You can view more on Allergan and Bill Ackman (Trades, Portfolio) here.

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