Allergan Inc. (AGN) has contacted companies including Sanofi (SAN) and Johnson & Johnson (JNJ) to see if either would be interested in acquiring the Botox maker, said people with knowledge of the matter, as it explores its options after receiving an unsolicited $45.7 billion bid from Valeant Pharmaceuticals International Inc.
Allergan is holding early-stage discussions with both companies while it decides whether to seek an alternative to Valeant’s offer, said the people, who asked not to be identified because the matter is private. It isn’t clear if either company is interested though Sanofi and Johnson & Johnson are both considering their options, the people said.
Allergan hasn’t decided how to respond to Valeant’s offer, and is making the inquiries to see if a sale to a larger rival is possible, said the people. In addition to finding a white knight to merge with, Irvine, California-based Allergan’s choices include buying another company to make itself tougher to acquire and negotiating with Valeant.
News of the approach to Sanofi and J&J damped speculation that Allergan will seek to acquire Shire Plc (SHP) to fend off the Valeant bid, and shares of Shire fell in late London trading after earlier gaining as much as 6.2 percent.
Activist investor Bill Ackman, who is supporting Valeant’s effort, spoke with Allergan Chief Executive Officer David Pyott and lead director Michael Gallagher last week. Ackman told them that he wouldn’t look favorably on Allergan pursuing a deal with another company in order to derail Valeant’s efforts, one of the people said.
Another potential white knight for Allergan could be German manufacturer Bayer AG. (BAYN) Investment banks have contacted Bayer to see if it has interest in Allergan, said another person familiar with the matter, though they added Bayer was focused on trying to win an auction for Merck & Co.’s over-the-counter medicines business.
Any potential suitor would have to show that its proposal would create more value than Valeant’s.
Spokesmen for Allergan, Sanofi, J&J, Bayer and Ackman’s Pershing Square Capital Management LP all declined to comment.
Allergan rose less than 1 percent to $166.23 as of 1:49 p.m. in New York, while J&J dropped less than 1 percent and Sanofi gained 3 cents.
Health-care deals are driving takeovers to their fastest start to the year since 2007, with industry players including Novartis AG, Pfizer Inc., and Mylan Inc. all working on major transactions. The companies are looking to dealmaking to bulk up as cash-cow drugs lose patent protection and the cost of developing increasingly sophisticated new medicines rises.
This month, Valeant said it has teamed up with Ackman to acquire Allergan. Ackman’s Pershing Square owns about 10 percent of Allergan’s stock and supports the deal, according to a statement. In the proposal, Allergan shareholders would receive $48.30 in cash and 0.83 a share of Valeant’s stock for each share they own.
Allergan makes a tempting target for buyers looking for growth. The company’s sales are projected to grow every year, reaching $9 billion in 2018 from $6.3 billion last year, according to the average of analysts’ estimates compiled by Bloomberg, with Botox the crown jewel.
Valeant’s strategy has been to acquire health-care companies that it views as having expenses that are too high, then lowering overhead, rapidly integrating and moving on to the next deal. Valeant Chief Executive Officer Mike Pearson called drugmakers “bloated” in an interview with Bloomberg last month.
Rather than spend what he says can be billions of dollars on research and development, Pearson prefers to acquire companies and then aggressively cut costs.
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