ALLERGAN INC AGN
January 16, 2015 - 11:32am EST by
rhianik
2015 2016
Price: 216.40 EPS 8.54 10.23
Shares Out. (in M): 298 P/E 25.4 21.2
Market Cap (in M): 64,600 P/FCF 0 0
Net Debt (in M): 2,041 EBIT 0 0
TEV: 62,600 TEV/EBIT 17.7 10.7

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  • Merger Arbitrage
  • Pharmaceuticals
  • Healthcare
 

Description

For those that are sitting on cash or looking for an alternative to negative real risk free rates, can I interest you in a 20-30% annualized return?

Because of the fallout from all of the failed M&A deals in the fall and the lack of available capital chasing large-cap merger arbitrage, we are able to purchase Allergan shares at a very attractive spread.  The deal is virtually certain to close in as little as 6 to 8 weeks. 

Based on current prices, we can earn a pretty fat return of 4.8% by buying AGN shares and shorting Actavis (ACT).

The terms of the deal are as follows: each share of AGN receives 0.3689 shares of consideration in ACT and the balance of $129.22 per share in cash.

Based on ACT's current share price of $265.13, total consideration is valued at $226.87.  Buying AGN shares at $216.40 and shorting out .3683 shares of ACT for each share of AGN allows investors to capture a 4.8% current spread or a 20-30% annualized return.

Here are the most recent comments made by Allergan CEO Brenton Saunders at this week's  JP Morgan Healthcare Conference:

 

January 13, 2015 presentation JP Morgan Healthcare Conference

So I thought I would end with just a quick update on where we stand on getting the Allergan deal closed. We completed our bridge and term loan financing. We announced yesterday that we had early terminations on our Hart-Scott-Rodino filing. We have the S4 on file and the SEC has determined no review. We've set their shareholder record date for later this month, and we anticipate that we'll be back out on the road in late February or early March to do the equity and debt raise. And then, of course, we are now a little ahead of schedule, and are thinking around the close that it could be as early as late first quarter or as late as early second quarter. And so, things are moving along better than expected, we're making great progress, and we're absolutely committed to making this the best of the best, so that we recognize the promise of this dynamic company and our growth orientation. Thank you.

 

The main risk to the deal a few months ago was the possibility of Pfizer swooping in to buy Actavis, but that risk appears to have passed.  Actavis management believes they can create significant shareholder value through cost synergies and long-term organic growth.

 

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

Shareholder vote

Close of deal financing

Close of the deal

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    Description

    For those that are sitting on cash or looking for an alternative to negative real risk free rates, can I interest you in a 20-30% annualized return?

    Because of the fallout from all of the failed M&A deals in the fall and the lack of available capital chasing large-cap merger arbitrage, we are able to purchase Allergan shares at a very attractive spread.  The deal is virtually certain to close in as little as 6 to 8 weeks. 

    Based on current prices, we can earn a pretty fat return of 4.8% by buying AGN shares and shorting Actavis (ACT).

    The terms of the deal are as follows: each share of AGN receives 0.3689 shares of consideration in ACT and the balance of $129.22 per share in cash.

    Based on ACT's current share price of $265.13, total consideration is valued at $226.87.  Buying AGN shares at $216.40 and shorting out .3683 shares of ACT for each share of AGN allows investors to capture a 4.8% current spread or a 20-30% annualized return.

    Here are the most recent comments made by Allergan CEO Brenton Saunders at this week's  JP Morgan Healthcare Conference:

     

    January 13, 2015 presentation JP Morgan Healthcare Conference

    So I thought I would end with just a quick update on where we stand on getting the Allergan deal closed. We completed our bridge and term loan financing. We announced yesterday that we had early terminations on our Hart-Scott-Rodino filing. We have the S4 on file and the SEC has determined no review. We've set their shareholder record date for later this month, and we anticipate that we'll be back out on the road in late February or early March to do the equity and debt raise. And then, of course, we are now a little ahead of schedule, and are thinking around the close that it could be as early as late first quarter or as late as early second quarter. And so, things are moving along better than expected, we're making great progress, and we're absolutely committed to making this the best of the best, so that we recognize the promise of this dynamic company and our growth orientation. Thank you.

     

    The main risk to the deal a few months ago was the possibility of Pfizer swooping in to buy Actavis, but that risk appears to have passed.  Actavis management believes they can create significant shareholder value through cost synergies and long-term organic growth.

     

     

    I do not hold a position with the issuer such as employment, directorship, or consultancy.
    I and/or others I advise hold a material investment in the issuer's securities.

    Catalyst

    Shareholder vote

    Close of deal financing

    Close of the deal

    Messages


    SubjectRe: Agree
    Entry01/16/2015 11:56 AM
    Memberrhianik

    Thanks PFQ.  Appreciate your comments.  Excellent point on COV/MDT, though I think shareholders/Board would be unlikely to approve Pfizer deal without AGN as part of the mix.  Also, agree that absent a deal, VRX/AGN combination would ultimately result in higher price than current levels for AGN shareholders.

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