Just Say Yes: Ackman Urges Allergan to Accept Valeant’s Overture

Source: Thinkstock

Source: Thinkstock

In an unusual move that has turned heads, Bill Ackman, activist investor and CEO of Pershing Square Capital, announced that he is partnering with Valeant Pharmaceuticals International Inc. (NYSE:VRX) in a bid to acquire Allergan Inc. (NYSE:AGN), the maker of the anti-wrinkle treatment Botox, for $46 billion, according to The Wall Street Journal.

Quebec-based Allergan is perhaps best known for producing Botox, but the biotech company makes several opthalmic treatments (Restasis, a dry-eyes treatment, is another top-seller), in addition to therapies in the areas of medical dermatology and neuroscience, according to the company’s website.

Ackman, as per usual, has been very vocal about the deal, which he says Allergan would regret not taking, should the company say no. The activist investor says that compelling “companies to do the right thing for shareholders,” is part of what he does, according to The Wall Street Journal. “And we have all kinds of ways of making that happen.”

“We will will do that here, we are committed to doing that here and we have an enormous financial and reputational” investment in making that happen, Ackman added.

Ackman warned that if Allergan were to turn down Valeant’s offer its stock would surely take a nosedive. He predicts it could fall by as much as $50 if the company were to reject the deal. “It’s not where we want to be, and it’s not where they want to be,” he added. Ackman is pursuing a 10 percent stake in Allergan, valued at around $4 billion, according to The Wall Street Journal, and the investment would be Ackman’s biggest ever.

Allergan, for its part, hasn’t said much about the potential acquisition. A representative from Allergan had no immediate comments for The Wall Street Journal regarding Ackman’s remarks, and the company hasn’t said no. Instead, the company merely confirmed that it had received Valeant’s bid and promised that its board and advisers would “carefully review and consider” the offer. Allergan advised its shareholders to take no action for the time being.

Ackman is the only activist investor who has taking interest in the transformation of the pharmaceutical industry, however. Forbes notes that last month, Carl Icahn was actively involved in the acquisition of Forest Laboratories, Inc. (NYSE:FRX) by Actavis, plc in a deal worth $25 billion.

Steve Brozak, an analyst who heads WBB Securities LLC and a Forbes contributor specializing in pharmaceutical industry news, says he sees some similarities between the Ackman and Carl Icahn’s strategies. The two are perhaps most recently known in conjunction with one another for their diametrically opposing views of Herbalife, but in this instance, Brozak says, there is a common thread.

Both investors, Brozak says, are forming “an alternative to the giant pharmaceutical model. Those ‘big pharma’ companies are so large, bureaucratic and slow-moving that they are unsustainable,” he added, in a report Tuesday. What both Ackman and Icahn understand is that Big Pharma is retreating, and the 21st century pharmaceutical model is one that is manageable, responsive, and yet large enough to sustain itself through both good and bad times, he says.

Brozak points to the recent Actavis/Forest Labs merger, the series of deals made by Novartis AG (NYSE:NVS) earlier this week, and the potential deal between Valeant and Allergan as exmaples of  large pharmaceutical companies trying to slim down (Novartis) and smaller companies trying to come together over complementary resources. Both Ackman and Icahn, he says, have proven to be money managers with the foresight necessary to continue to be major participants in the industry’s “realignment.”

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