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M&A alert: AbbVie agrees to acquire Allergan for $63 billion

Confirming reports published by Wall Street Journal earlier today, pharmaceutical giant Abbvie (NYSE: ABBV) said it would acquire Irish competitor Allergan (NYSE: AGN) for $63 billion.   

As per the deal, Allergan shareholders will receive 0.8660 AbbVie shares and $120.30 in cash for each Allergan share, for a total consideration of $188.24 per Allergan Share.

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Image for representation (Photo by Drew Hays on Unsplash)

The deal, which is expected to close early next year, represents approximately 45% premium over Allergan’s closing price on Monday.

Abbvie shares plunged 7.5% immediately following the announcement, while Allergan stock soared 28.5%.

AbbVie expects annual pre-tax synergies and other cost reductions from the deal of at least $2 billion in the third year while leaving investments in key growth franchises untouched. 

READ: Abbvie’s oncology push makes it an attractive stock

Immediately following the deal, AbbVie shareholders are expected to have approximately 83% stake in AbbVie on a fully diluted basis, and the rest with Allergan shareholders. 

Allergan CEO Brent Saunders said, “With 2019 annual combined revenue of approximately $48 billion, scale in more than 175 countries, an industry-leading R&D pipeline and robust cash flows, our combined company will have the opportunity to make even bigger contributions to global health than either can alone.”

The deal comes at a time the North Chicago, Illinois-based bio-pharmaceutical company is fast approaching the closure of its patent protection for its flagship product Humira. The immunology drug accounts for more than half of Abbvie’s total revenue.

READ: 10 biggest US mergers & acquisitions announced so far in 2019

With the acquisition, AbbVie could be looking to establish a strong base in the beauty drugs market.

This is the second massive deal to be announced in the bio-pharma segment this year. On January 3,  Bristol-Myers Squibb (NYSE: BMY) said it would acquire its peer Celgene (NASDAQ: CELG) in a $74-billion cash-and-stock deal.  However, this deal has been delayed, first due to shareholder opposition, and then due to antitrust concerns.

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