Tuesday, 31 May 2016
Last updated 13 min ago
Jul 10 2014 | 6:14am ET
In an effort to stave off a hedge fund-backed hostile takeover bid, Allergan Inc. is looking at an acquisition of its own.
The pharmaceutical company’s CEO said yesterday that investors have urged him to seek out a sizeable acquisition. David Pyott told The Wall Street Journal that, with $14 billion in future free-cash flow and access to debt markets, Allergan has more than enough money to pull off a deal.
Among the targets under consideration are companies based outside of the U.S.; such a deal could offer Allergan a tax break.
Pyott did not say whether any talks with targets were underway.
Pyott is seeking to stymie a $53 billion offer for Allergan from Valeant Pharmaceuticals International, which is working with Pershing Square Capital Management. Valeant has launched a hostile tender offer and Pershing Square a proxy contest to oust a majority of the Botox-maker’s board.
Allergan has insisted that Valeant’s deal significantly undervalues it, and has sharply criticized what it calls Valeant’s unsustainable strategy of acquisitions and price increases. But the pressure has forced Allergan to rethink its own strategy; Pyott said the company was considering a large share buyback or special dividend to return capital to investors.
Earlier this week, Bloomberg News reported that Allergan planned to shelve unpromising drugs it is working on and to overhaul its management incentive program in an effort to cut costs.