Allergan, the company that makes Botox, is preparing to sell itself to pharmaceutical group Actavis in a $66bn (£42bn) tie-up that will be one of the biggest deals of the year.
The two companies have reportedly agreed terms that value Allergan at between $215 and $220 a share and were expected to announce the merger on Monday.
If it goes through, the deal will allow the Botox maker to see off a hostile takeover from Canada’s Valeant Pharmaceuticals, which has teamed up with activist investor Bill Ackman and his hedge fund, Pershing Square Capital Management.
Allergan, which first acquired the rights to distribute botulinum toxin in 1988, has spent months fending off advances from the Valeant team, because it believes the Canadian drug maker will slash its research budget and destroy its ability to create new products. Allergan was founded in Los Angeles in 1948 with an anti-allergy nose drop, but its best-seller is the face-freezing filler Botox, which it is now seeking to develop into new uses, such as osteoporosis treatments.
Actavis, which makes a wide range of over-the-counter and prescription drugs, emerged as a white-knight bidder after an acrimonious public battle between Allergan and Valeant. Valeant’s latest offer values Allergan at $53m, up from an opening offer of $47bn.
Allergan has rebuffed these attempts, arguing that it has a “diametrically opposed strategy” to Valeant. But the Botox maker has come under heavy pressure. Ackman’s Pershing Square has a 10% stake in Allergan and has been pushing to unseat the majority of the Allergan board at a special election in December.
The dealmaking comes as consumer goods giant Reckitt Benckiser confirmed that it will spin-off its US-based pharmaceutical business. The company, re-named Indivior, will concentrate on drug addiction treatments and will publish a prospectus to investors on Monday, ahead of planned floatation on the London Stock exchange on 23 December.
Chief executive Shaun Thaxter, who has led the division within Reckitt Benckiser since 2009, said the stand-alone company had “the best pipeline in the world” of new forms of treatment for heroin and cocaine addiction.
But the company must convince investors it can thrive as a standalone business, amid shrinking revenues for its main product, heroin addiction treatment Suboxone, which lost US patent protection in 2009. Around 80% of Indivior’s revenues come from the US, although Thaxter said the market for heroin-addiction treatments was growing, as more countries treat addiction as a medical problem rather than an issue for the criminal justice system.
Indivior estimates that 1.2m people in China are addicted to opiods and sees an opportunity for growth, as the Chinese government seeks to offer new treatments for patients.
The Indivior spin-off will be put to a vote of Reckitt Benckiser shareholders on 11 December. The consumer goods giant, which makes Dettol, Nurofen and Finish dishwasher tablets, has said it wants to concentrate on its household brands.
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