Allergan Inc. share price down, revives negotiations over the acquisition of Salix Pharmaceuticals

According to people familiar with the matter, Allergan Inc. has renewed negotiations over the acquisition of Salix Pharmaceuticals Ltd, which first started in July, as it seeks to fend off a hostile takeover bid from Valeant Pharmaceuticals International Inc.

The acquisition of Salix, if finalized, is likely to be valued at more than $10 billion in cash. Some of the people familiar with the situation shared that the deal could be announced by the end of the week or next. Still, they explained that a final decision has not been made and the negotiations, which have been on and off before, could fall apart once again.

Botox-maker Allergan rejected an undisclosed takeover offer by Actavis in August. The amount, however, is speculated to have been in the range of Allergans current market value of around $50 billion. Unlike Valeant, Actavis is committed only to a friendly acquisition, having pledged to maintain Allergans spending for R&D, but Allergan rejected the offer partly due to its focus on finalizing a deal with Salix.

In contrast, a successful hostile takeover by Valeant will be followed by a cut in such investments, the company has indicated. Valeant, together with activist investor William Ackman’s Pershing Square Capital Management LP, made a $54-billion cash and stock offer in April, which Allergan rejected. The bid was then raised twice, most recently to $72 in cash and 0.83 of Valeants shares for each Allergan share. A successful acquisition of Salix will make Allergan much more expensive and harder for Valeant to buy.

As reported by Bloomberg, the Chief Executive Officer of Allergan Mr. David Pyott shared in a statement in July that the U.S.-based company was seeking purchases and “has a lot of options” in front of it. The official representatives of Allergan, Salix and Actavis all refused to make any comments on the situation.

Allergan Inc. fell by 1.24% on Monday in New York to close at $166.12 per share, marking a one-year change of +79.34%. The company is valued at $49.99 billion. According to CNN Money, the 15 analysts offering 12-month price forecasts for Allergan Inc. have a median target of $200.00, with a high estimate of $240.00 and a low estimate of $174.00. The median estimate represents a +20.39% increase from the last price of $166.12.