Allergan signs on NYSE
Brendan McDermid | Reuters
Almost four years ago, billionaire investor Leon Cooperman proposed to CNBC that Botox maker Allergan could buy AbbVie.
At that time, Allergan sold its generic drug business to Israel drugmaker Teva Pharmaceutical for $ 40.5 billion. The cash and equity agreement, announced in July 2015, was seen by investors as a positive for the Irish-based pharmaceutical company. It freed Allergan to focus on more bankable brand names, while providing more money to pay off debt.
Allergan tries to move higher up the food chain, so they will probably go for a labeled drug agency, says Cooperman, head and CEO of Omega Advisors, to CNBC in an interview on July 28, 201
Allergan, the manufacturer of Botox and blockbuster eye treatment restatis, is not the same industry leader it once was. The stock has lost about half the value since 2017. Drugmaker has been struggling since the planned $ 160 billion mega agreement with Pfizer fell through 2016 after Obama's withdrawal, analysts say. The pharmaceutical company has also been hit by drug problems and generic competition.
The company's management has been pressured by activist investor from David Tepper for management changes. Shareholders have asked Allergan to split or sell the company.
Investors have become frustrated, says analyst Randall Stanicky, RBC Capital Markets, who has been asking to look up the Allergan since 2017. He said a combination of drug problem setbacks, capital gains disappointments, strategic failures, and the company's inability to increase earnings has pushed the shares.
Now Allergan's fortunes can change. AbbVie announced on Tuesday that it would buy Allergan for around $ 63 billion, a 45% premium over Allergan's $ 129.57 closing price on Monday. Under the agreement, Allergan shareholders will receive 0.866 AbbiVie shares and $ 120.30 in cash for each Allergan share for a total value of $ 188.24 per share. If approved, the agreement will combine two struggling companies seeking growth.
Stanicky said the deal is a "fine exit from a difficult situation" for Allergan. "I think investors should be happy with this exit," he added.
Allergan investors cheered deal Tuesday. The shares in Allergan increased 25.4% on Tuesday while AbbVie shares fell 16.3%.
AbbVie has been looking to diversify the portfolio as a blockbuster arthritis treatment. Humira faces competition from cheaper versions in Europe and is facing US patent expirations in 2023. Allergan's aesthetic products and eye care and other medications can help AbbVie shore up sales.
David Maris, a research analyst at Wells Fargo covering Allergan, told CNBC's "Power Lunch" on Tuesday that he is not convinced that the deal is a better long-term alternative for Allergan shareholders who look past Humira's patent expiry. But in a subsequent phone call, Maris added that the stock had been under-designed so long, the board had to do something.
The deal is a "slightly disappointing," Maris said. "" I can see why AbbVie wants to diversify away from Humira. I don't know why an Allergan shareholder will want to diversify into Humaria. "
Girls Holz, girl personnel for healthcare professionals, said that AbbVie's stockpile is a" slightly overdone ", saying this solves a growth problem for every company." I feel that I am the only person in the world who feels that this agreement is not a disaster, he says. "It's a homerun for Allergan shareholders."
-AP contributed to this report.