By Cara Lombardo, Jonathan D. Rockoff and Dana Cimilluca
AbbVie Inc. agreed to buy Allergan PLC for about $63 billion, as
the two big drugmakers bet a combination will deliver new sources
of growth they have struggled to find on their own.
The takeover is worth about $188 a share in cash and stock, the
companies said in a statement. The price represents a 45% premium
over Allergan's closing share price Monday of $129.57. If not for a
surge in the shares in recent days on expectations for a breakup of
the company, the premium would be even bigger.
The Wall Street Journal reported earlier Tuesday that the deal
was imminent.
Buying Dublin-based Allergan would deliver a dominant position
in the $8 billion-plus market for Botox and other beauty drugs, as
well as a number of popular eye treatments, as AbbVie braces for
the end of patent protection for the world's top-selling drug,
Humira.
The companies' portfolios have some overlap in treatments for
brain, women's-health, stomach and other disorders, though the
combination would take AbbVie into the new realm of frown-line
smoothing, eyelash lengthening and double-chin removal.
Allergan's nearly $16 billion in yearly revenue would also give
AbbVie another source of cash to hunt for a new generation of
products.
Lately, Wall Street has been clamoring for change at Allergan,
with its shares trading at a fraction of their peak of more than
$330 in the summer of 2015. Analysts have been saying the company
could split into two pieces, but few expected CEO Brent Saunders to
pull off a sale, especially at such a lofty premium.
Richard Gonzalez will remain chairman and CEO of AbbVie. Two
Allergan directors including Mr. Saunders will join AbbVie's board
when the deal closes.
About two-thirds of the purchase price is in cash, with Allergan
stockholders receiving 0.8660 AbbVie shares and $120.30 in cash for
each share they own, for total consideration of $188.24 a
share.
Allergan stock jumped 29% to $167 in morning trading Tuesday,
while AbbVie shares fell 12% to $69.
The deal, worth about $80 billion including debt, is the second
this year that would knit together two of the world's biggest
pharmaceutical companies. Earlier this year, Bristol-Myers Squibb
Co. agreed to pay $74 billion for rival cancer drugmaker Celgene
Corp.
AbbVie, based in the Chicago suburbs, has been pursuing deals of
various sizes in an effort to diversify beyond Humira ever since
the company was split from Abbott Laboratories in 2013.
Humira, a rheumatoid arthritis treatment, rang up $19.1 billion
of AbbVie's $32.8 billion of revenues last year. But lower-priced
versions, known as biosimilars, are on sale in Europe and are
scheduled to go on sale in the U.S. in 2023.
AbbVie had tried to strike a big deal in 2014, when it reached
an agreement to buy Irish rare-disease drugmaker Shire for $54
billion. But AbbVie called off the deal later that year amid
efforts by the Obama administration to restrict such tax-lowering
transactions, known as inversions.
Other attempts to find new big-selling cancer, immune and other
drugs have also stumbled, except for a roughly $20 billion deal in
2015 for Pharmacyclics Inc., the maker of the Imbruvica cancer
therapy. AbbVie shares the treatment's rights with Johnson &
Johnson.
But Imbruvica, which generated $3.6 billion in revenue for
AbbVie last year, can't alone make up for the approaching loss of
Humira sales.
In Allergan, AbbVie will take on a once-highflying drugmaker
that has also struggled to find new sales growth.
Allergan's shares soared to more than twice their current level
four years ago as the company and Mr. Saunders became Wall Street
darlings following a series of bold acquisitions. But Allergan's
luster has faded in the past few years as opportunities for deal
making have dwindled along with the stock and only its
aesthetic-medicine business grew to investors' satisfaction.
Allergan, which started as a California pharmacy and then carved
a niche as an eye-treatment business, rocketed into the ranks of
big drugmakers after exploiting Botox's use smoothing frown lines
and wrinkles.
A combination with Irish drugmaker Actavis in 2015 transformed
the company. Mr. Saunders has been CEO since 2014 and chairman
since 2016.
For a time, Pfizer Inc. was going to buy Allergan for about $150
billion, but that transaction, also an inversion, fell through amid
pushback from the Obama administration.
Then investors soured on the company, partly due to concerns
that it wouldn't be able to replace sales from eye drug Restasis,
which was losing its patent protection.
Investors also drove down the stock on a failed plan to bolster
Restasis by selling its patent rights to an Indian tribe, as well
as mixed messages from management about the company's prospects.
Rivals are trying to edge in on Botox, and the company's efforts to
develop new drugs, like a depression treatment, faltered.
The concerns triggered pressure from Wall Street. Mr. Saunders
said on the company's earnings call last month that there is a
sense of urgency within the company and pledged that the board was
reviewing all options.
Analysts predicted Allergan could split itself in two, with one
business dedicated to fast-growing brands and segments such as
aesthetics and eye care, and the other focused on gastrointestinal
and women's-health treatments.
Allergan in recent years came in the crosshairs of David
Tepper's activist hedge fund Appaloosa LP, which criticized the
company's performance and pressured it to separate the roles of
chairman and CEO. The company had said it would separate the roles
at its next leadership transition. In May, Allergan shareholders
voted down a shareholder proposal from Appaloosa to separate the
positions.
Also to satisfy investors, Allergan in the past year tried to
sell its women's health and anti-infective drug businesses but said
in January it would keep the unit.
Write to Cara Lombardo at cara.lombardo@wsj.com, Jonathan D.
Rockoff at Jonathan.Rockoff@wsj.com and Dana Cimilluca at
dana.cimilluca@wsj.com
(END) Dow Jones Newswires
June 25, 2019 09:51 ET (13:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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