Shares in Valeant Pharmaceutical International Inc. (TSX:VRX) (NYSE:VRX) soared in after-hours trading in New York on Monday after the Quebec-based company announced it had teamed with activist investor Bill Ackman in what looked to be a US$40-billion bid for Botox maker Allergan.
Valeant said intends to propose a merger with Allergan using a combination of Valeant stock and cash.
The transaction size was not been disclosed, but Valeant said it expected the cash portion of the deal to be at least US$15 billion.
In a separate filing, Ackman's Pershing Square Capital Management said it owns a 9.7 per cent stake in Allergan worth $4.1 billion. Ackman's stake would make a Allergan deal worth around US$40 billion.
Allergan said it had no comment on the bid late Monday.
On the New York Stock Exchange, Valeant shares were up $11.48 or 9.11 per cent at US$137.49 in after-hours trading after having risen $3.96 or 3.24 per cent to $126.01 in regular trading Monday.
On the Toronto Stock Exchange, Valeant shares had closed up $4.31 or 3.21 per cent at C$138.76.
Allergan's stock (NYSE:AGN) jumped $30, or 21.13 per cent, to $172 in after-hours trading after having closed up $8.08 or 6.03 per cent at $142.
Word of the latest takeover bid follows Valeant's US$8.7-billion acquisition last summer of eye care company Bausch and Lomb, which gave it a major share in the market for contact lenses, eye drugs and eye surgical devices.
CEO Michael Pearson said earlier this year that the speciality pharmaceutical company would continue to see acquisitions in hopes of becoming a global giant even as it was counting on anti-aging treatments and other aspects of its esthetics business to help drive profits.
Valeant's esthetic business, including lip fillers and laser devices to remove wrinkles and fat, grew more than 30 per cent in both the United States and Canada last year, while the market itself was expanding in at least the high single digits. In December 2012, it acquired dermatology products maker Medicis Pharma for US$2.6-billion.
Allergan, based in Irvine, Calif., has long been one of the star performers in the specialty pharmaceutical sector, reporting revenue of US$6.3 billion last year, up 12 per cent from 2012. The company's growth has been driven by expanding use of its blockbuster product Botox, combined with a broad offering of eye care drugs, skin care formulas and breast implants.
Last year Botox sales rose 12 per cent to nearly $2 billion. First introduced in 1989, the injectable drug is best known for its ability to smooth wrinkle lines on aging foreheads. But over the years Allergan has racked up more than a half-dozen other approved uses for Botox, including treatment for neck spasms, eye muscle disorders and migraine headaches.
Valeant's full-year revenue in 2013 was C$5.77 billion, a figure expected to increase to between C$8.2 billion and $8.6 billion this year, even without the Allergan deal.
— With files from The Associated Press