Farallon Capital raises stake in Allergan



Allergan Inc. position

Farallon Capital Management increased its position in Allergan Inc. (AGN) during the third quarter of 2014. The stock accounted for 3.13% of the total portfolio—up from 1.50% of the fund’s 2Q14 portfolio.

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Overview of AGN

Allergan develops and commercializes the following products for the ophthalmic, medical aesthetics, medical dermatology, and other specialty markets:

  • pharmaceuticals
  • biologics
  • medical devices
  • over-the-counter items

The global healthcare company also makes the anti-wrinkle treatment Botox.

Allergan’s acquisition by Actavis

On November 17, the generic drug maker Actavis plc (ACT) agreed to buy Allergan for $66 billion or $219 per share in cash and stock. The acquisition price is 10% above AGN’s closing price on November 14. The boards for both companies approved the transaction.

Actavis said, “The combination will create one of the top ten global pharmaceutical companies by sales revenue, with combined annual pro forma revenues of more than $23 billion anticipated in 2015. The transaction will help in long-term, double-digit organic revenue and earnings growth. It will generate at least $1.8 billion in annual synergies commencing in 2016.”

The companies expect the deal to close by 2Q15.

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Valeant’s battle for Allergan

The takeover bid from Actavis ended a seven-month, hostile pursuit of Allergan by Valeant Pharmaceuticals. Valeant had teamed up with activist investor William Ackman of Pershing Square Capital Management to offer about $53 billion for Allergan. 

Allergan rebuffed the Canadian company’s takeover offers, suing Valeant and Pershing Square for the alleged violation of securities trading laws. Commenting in November on the bid made by Actavis, Valeant said that it “cannot justify to its own shareholders paying a price of $219 or more per share for Allergan.”

Strongest revenue growth in 3Q14

Allergan’s revenue increased 17.2% year-over-year to $1.79 billion during the third quarter. Diluted EPS (earnings per share) were $1.03 versus $1.10 in 3Q13. The company declared a quarterly dividend of $0.05 per share, payable on December 11.

Other third-quarter activities at Farallon

In 3Q14, Farallon Capital Management started new positions in Time Warner Inc. (TWX), Tim Hortons Inc. (THI), International Game Technology (IGT), and Cognizant Technology Solutions (CTSH). The fund increased its positions in DIRECTV (DTV), Covidien plc (COV), and Shire plc (SHPG). Positions sold by Farallon during the third quarter include Yahoo! Inc. (YHOO), Oracle Corp. (ORCL), and Weyerhaeuser Co. (WY).

Farallon’s position change in Shire plc will be the topic of the next part of this series.


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