The transaction is valued at about $66bn, or $219 per Allergan share, and the combined companies will create one of the top 10 global pharma companies by sales revenue, with combined annual pro forma revenues of more than $23bn anticipated in 2015. News of the acquisition has propelled Allergan stock up about 10%, while Actavis stock is up about 4%.
The companies said in a statement that the growth profile of the combined pharmaceutical business “will be unparalleled,” with the ability for double-digit revenue and earnings growth. The addition of Allergan’s portfolio, including multiple blockbuster therapeutic franchises, also doubles the revenues of Actavis’ North American Specialty Brands business.
Actavis projects that the transaction will generate at least $1.8bn in annual synergies commencing in 2016, in addition to the $475m of annual savings previously announced by Allergan. Those savings by Allergan include the layoffs of about 1,500 employees, and the closure of three sites in California and Massachusetts.
The deal will also be a boon for Allergan’s tax rate as Actavis is now based out of Ireland and has a lower tax rate.
Actavis, whose tax rate is about 16%, could reduce Allergan’s 2015 tax bill by between $240m to $370m, according to the Wall Street Journal.
In addition, whereas R&D spending was a concern of Allergan’s when faced with the prospect of being acquired by Valeant, the combination with Actavis “will provide a strong commitment to R&D,” the companies said, “with an exceptional level of annual investment of approximately $1.7bn, focused on the strategic development of innovative and durable value-enhancing products within brands, generics, biologics and OTC portfolios.”
The combination of the two companies is expected to add approximately 15 projects in near- and mid-term development to Actavis’ portfolio.
Valeant, which offered $54bn for Allergan, seemed to think the price of Allergan was too high.
Valeant Chairman and CEO Michael Pearson said in a statement, “While we will review any such agreement in determining our course of action, Valeant cannot justify to its own shareholders paying a price of $219 or more per share for Allergan.”
Under Pearson, Valeant has acquired about three-dozen companies costing $19bn.