Suhag A AL6050.docx - ALLERGAN CASE ANALYSIS I Anirudh...

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ALLERGAN CASE ANALYSIS I Anirudh Suhag hereby certify that the attached assignment and all materials therein have been created by me unless otherwise footnoted and that all the material contained herein including charts, graphs and other materials have been created by me. Anirudh Suhag, 28 Aug 2020 216220931 [email protected]
Company and Industry Overview Allergan Inc. (now Allergan plc) was founded in 1948 and incorporated in 1950. It began as an eye care company by taking advantage of the launch of hard contact lenses, but focused on large R&D investments, mostly targeted towards specialty pharmaceuticals. The key reason behind Allergan’s success is that the senior management focuses on long term gains rather than short- term, which can be clearly seen by their huge investments in R&D, their focus on keeping the shareholders happy, and the way they treat their employees. Allergan Inc has had its share of successful acquisitions and spun-offs before it was acquired by Actavis plc, which show that the leadership team at Allergan was well adept in managing acquisitions- it was acquired by SmithKline in 1980 and was spun off in 1989; Allergan’s ophthalmic and contact lens care businesses were spun-off to create a new company Advanced Medical Optics; Allergan acquired Innamed Corporation, MAP Pharmaceutical Inc and Kythera Biopharmaceuticals. The reason Valeant and even Actavis are interested in acquiring Allergan is that it has strong financials: revenue growth is higher than industry average of 8.7%, Debt to Equity ratio is low(.3), and is below the industry average, gross profit margin is really high, and share price has jumped over 106% in the last year.[ CITATION Lin14 \l 4105 ] Current Situation: I will be evaluating the case by taking the position of the BOD of Allergan faced by a hostile takeover bid from Valeant. Valeant is a serial acquirer of specialty drug makers and has offered multiple proposals to Allergan to merge the two companies and each proposal is better than the previous one. The last offer provided to Allergan is $177 per share, which is a 37% mark-up [see Appendix 2] from the value of Allergan’s share at the time of the offer. Considering the hostile takeover bid by Valeant in partnership with Pershing Square, it has become imperative for Allergan to take some difficult decisions in a timely fashion. Allergan has

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