By Rod Nickel
(Reuters) - Canada's Valeant Pharmaceuticals International Inc said on Tuesday it and activist investor Bill Ackman made an unsolicited $47 billion bid to buy Botox maker ALLERGAN (AGN.NY)Inc as it seeks to become one of the world's five biggest drug companies.
The offer, if successful, would bring together two mid-sized pharmaceutical companies with expertise in skin care and eye care products, and is highly unusual as activist investors typically buy stakes and then agitate for strategic change.
Ackman's Pershing Square Capital Management, Allergan's largest shareholder with a 9.7 percent stake, disclosed in a filing on Monday it is supporting the bid.
Allergan said in a statement that it has received the offer, and will carefully consider the proposal and "pursue the course of action that it believes is in the best interests of the company's stockholders."
Valeant offered to pay $48.30 a share in cash and 0.83 of its common share for each Allergan share, valuing Allergan at $152.88 a share, a premium of over 7 percent to the company's closing price on Monday.
The offer is 31 percent higher than Allergan's stock price on April 10, the day before Pershing Square's ownership reached 5 percent.
Shares of Allergan jumped 17 percent in trading before the morning bell to $166 in New York, signaling investors expect a sweetened bid to emerge.
Valeant stock rose 5 percent to $132.60.
Valeant has been on a buying spree since 2010 and last year acquired contact lens maker Bausch & Lomb Holdings. Chief Executive Michael Pearson said in January the drugmaker wants to become one of the world's top five pharmaceutical companies by market capitalization by the end of 2016, largely through acquisitions.
"This proposal represents an undeniable opportunity to create extraordinary value for both Allergan and Valeant shareholders by establishing an unrivaled platform with leading positions in ophthalmology, dermatology, aesthetics, dental and the emerging markets" Pearson said in a statement on Tuesday.
Pearson said Allergan Chief Executive David Pyott and the company's board had been unwilling to discuss a merger with Valeant.
The Laval, Quebec-based company, whose products include antidepressant drug Wellbutrin and over-the-counter remedy Cold-FX, favors targets where it can aggressively cut costs. Valeant said it expects to realize at least $2.7 billion in annual cost synergies from a combination with Allergan.
A large-scale cost-cutting approach may not work at Allergan without damaging the business, BMO Capital Markets analyst David Maris said in a note.
But J.P.Morgan analyst Chris Schott said the potential for savings from operating expenses and Valeant's low tax rate is compelling.
Allergan, which also has a lucrative portfolio of ophthalmic drugs to treat conditions such as glaucoma and dry eye, is larger by revenue, reporting $6.3 billion in sales last year. Valeant reported $5.8 billion in revenue last year.
(Reporting by Euan Rocha in Toronto, Rod Nickel in Winnipeg, Esha Dey in Bangalore and Caroline Humer in New York; Editing by Saumyadeb Chakrabarty, Nick Zieminski and Meredith Mazzilli)
