Resolution to the Allergan Deal

We finally have a resolution to the takeover of Allergan and boy did we benefit as shareholders.  After a long battle against Bill Ackman and Valeant Pharmaceuticals that began with a takeover offer in April, Allergan has decided to accept a “friendly” takeover offer from Actavis for $219/share valued at $66 billion.  I was initially hoping the Valeant deal would go through because of the potential synergies between their business lines but after months of fighting it became clear the union wasn’t meant to be.

Actavis has followed a somewhat similar strategy as Valeant over the past few years by generating growth through acquisitions.  They’re big deals as of late include Forest Labs earlier this year ($28 billion) and Warner Chilcott last year as a tax inversion ($5 billion).

With it all said and done, I’m actually happier to see Actavis complete this takeover.  It’s certainly not as tenuous as the potential merger with Valeant and the cultures of each company seem to align better.  I’m going to retain our position in Allergan and wait for the deal to close.  For each share of Allergan we own, we’ll receive $129.22 of cash and 0.3683 shares of Actavis stock.  This is a nice way to take our profits out of the investment as cash and to basically allow our initial investment amount to continue on as shares of Actavis.  For me, the key is Actavis’ acquisition of Forest Labs – a company/stock I used to like a lot.  If Allergan were being acquired by one of the larger, slow-growth drug companies, I would sell the stock and move on but in this case I think the new company still has a lot of strong years ahead.

It’s interesting to see that both Actavis and Valeant have been up quite a bit the past two days.  I guess other investors agree this deal is the best outcome.

Actavis (ACT) – 1 year

-Nick