Botox maker Allergan in $63bn swoop by rival AbbVie
Botox maker Allergan is being bought by rival AbbVie for about $63bn (£49bn) in the latest blockbuster deal in the pharmaceutical sector.
AbbVie has been under pressure to reduce its reliance on rheumatoid arthritis treatment Humira, the world's best-selling drug that generated sales of about $20bn last year.
It is already facing competition from cheaper generic versions in Europe and its patents will expire in 2023 in the United States - its biggest market. Humira reported the first fall in quarterly sales in years in the three months to March.
The huge amount of cash generated by the drug meant AbbVie was well placed to buy Allergan, said chief executive Richard Gonzalez.
He will run the combined business, will have a combined revenues of $48bn, while Allergan boss Brent Saunders will join AbbVie's board. He said the deal "creates compelling value for Allergan's stakeholders, including our customers, patients and shareholders".
Mr Saunders made a series of deals in 2014 to create Allergan in its current form, but its shares have lost about half their value since Pfizer walked away from a $160bn deal three years ago in 2016.
He has been under pressure over the past year to break up or sell the company, with activist investor David Tepper running a campaign to urge Allergan to recruit an independent chairman.
Investors have also questioned Mr Saunders' growth plans and the quality of the company's drug pipeline.
Shares of AbbVie have also struggled, falling more than a third from highs hit in January 2018 over concerns about competition to Humira.
The deal, which is subject to approval from competition regulators, will see Allergan move its domicile back from Dublin to the US.
It comes months after Bristol-Myers Squibb agreed to buy Celgene for $74bn. Shares in both companies fell this week after they pushed back the time-frame for closing the deal and announcing plans to sell psoriasis treatment Otezla to win regulatory approval for the deal.
Allergan remains an industry leader in medical aesthetics and also specialises in eye care, central nervous system and gastroenterology treatments.
"This is yet another transaction driven by diversification, scale and low borrowing costs, rather than portfolio or top-line synergies," said SVB Leerink analyst Geoffrey Porges.
The offer price is of $188.24 a share is a 45pc premium to Allergan's closing price on Monday. Its shares jumped 26pc to $164 in New York on Tuesday, while AbbVie fell 15pc to $66.51.
It was a better-than-expected outcome for Allergan as investors and analysts had expected a split, Cantor Fitzgerald analyst Louise Chen wrote in a note.