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Allergan Finds White Knight In $66B Actavis Takeover

Allergan Inc. said Monday it would sell itself to rival drugmaker Actavis PLC for roughly $66 billion to thwart the long-running $55 billion hostile buyout campaign launched by Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman.

Under the deal's terms, shareholders in California-based Allergan will receive about $219 per share in cash and stock, dwarfing the consideration tied to Valeant's proposed takeover, which based on recent trading has generally hung near the $180-per-share mark.

Together, Allergan and Actavis would land among the world's 10 biggest life sciences outfits, giving them greater flex in a quickly consolidating sector in the marketplace.

“Today's transaction provides Allergan stockholders with substantial and immediate value, as well as the opportunity to participate in the significant upside potential of the combined company,” Allergan CEO David Pyott said in a statement.

The deal comes after speculation kicked up over the weekend that Allergan and Actavis were closing in on an agreement. It also comes as the clock is ticking down to a Dec. 18 meeting where Allergan's investors are set to vote on a board overhaul plan, proposed by Ackman, that would replace more than half its sitting directors to effectively pave the way for a Valeant acquisition.

Valeant and Ackman have tried unsuccessfully since April to swing the Botox maker in favor of a deal, a pursuit that has swelled into the year's most acrimonious – and litigious – deal-making saga. In recent months, Ackman – whose Pershing Square Capital Management LP holds a 9.7 percent Allergan stake – intensified the efforts with his proposed boardroom shakeup while Valeant has slammed the target's top brass for shunning negotiations.

But the high-profile chase appears to have ended with the Actavis deal announcement.

"We have seen the announcement that Allergan and Actavis have made, and while we will review any such agreement in determining our course of action, Valeant cannot justify to its own shareholders paying a price of $219 or more per share for Allergan,"  Valeant Chairman and CEO J. Michael Pearson said in a statement.

From the beginning, Allergan has said Valeant's offer significantly undershoots its true value. It has also taken aim at Valeant's acquisition-anchored growth strategy, and questioned the viability of its business model. For months, Allergan has tried to bring an end to the Valeant-Ackman hunt by nailing down an alternative transaction of its own.

Ackman and other Allergan investors have rallied against that strategy, including when the activist threatened to sue Allergan if it struck a separate deal without hinging it on a shareholder vote. But with the hefty consideration attached to the Actavis deal, which depends on investor approval, critics face a tough fight to beat Allergan this time around.

Allergan is represented by a Latham & Watkins LLP team led by partners Cary Hyden, Paul Tosetti and Michael Treska, along with Daniel Rees, Aneta Ferguson, Karen Silverman, Joshua Holian, Sydney Smith, Jim Barrall, Maj Vaseghi, Christopher Norton, Glen Collyer, David Kuiper, John Manthei, Betty Pang, Rebecca Brandt, Laurence Stein and Eric Song.

The company is also represented by a Wachtell Lipton Rosen & Katz team led by Daniel A. Neff and David A. Katz along with Wayne M. Carlin, William Savitt and Bradley R. Wilson in addition to attorneys from Richards Layton & Finger PA.

Serving as financial advisers to Allergan are Goldman Sachs & Co., which is represented by Jane Goldstein of Ropes & Gray LLP, and Bank of America Merrill Lynch, which is represented by Philip Richter, David B. Hennes, William G. McGuinness, Peter L. Simmons, Alan S. Kaden and Arthur Fleischer Jr. of Fried Frank Harris Shriver & Jacobson LLP.

Actavis is represented by Cleary Gottlieb Steen & Hamilton LLP team led by Victor Lewkow, Paul Shim and James Langston, along with Meme Peponis, Jeffrey Karpf, Michael Albano, Jason Factor, Mitchell Lowenthal, Roger Cooper, Nicholas Levy and Christopher Cook. A team from Weil Gotshal & Manges LLP including Steven Newborn, Ann Malester, John Sipple, Brianne Kucerik, Alexis Brown-Reilly and Kristin Sanford handled antitrust matters for the company.

JPMorgan Chase & Co. is serving as Actavis' financial adviser.

Valeant is advised by a Sullivan & Cromwell LLP team including Alison S. Ressler, Eric M. Krautheimer, Alan J. Sinsheimer, Lisa A. Murison, Scott C. Campbell, Aaron B. Werner, Katherine J. Baudistel, Ronald E. Creamer Jr., S. Neal McKnight, Ari B. Blaut, Matthew M. Friestedt, Regina L. Readling, Nader A. Mousavi, Spencer F. Simon, Yvonne S. Quinn and Eric H. Queen. Also representing the company are Stephen F. Arcano, Robert A. Copen, Steven C. Sunshine, and David M. Rievman of Skadden Arps Slate Meagher & Flom LLP and Osler Hoskin & Harcourt LLP.

Ackman is represented by a Kirkland & Ellis LLP team including Stephen Fraidin and Richard M. Brand, along with Ross Leff, Christian Nagler, Scott Price, Steve Clemens, Russell Light, Bilal Sayyed, Jay Lefkowitz, Robert Khuzami, Daniel Tavakoli, Charles Clark, John Del Monaco, David Beller, Andrew Kimball, Laura Brockelman, Willard Boothby, Lauren Rakower, Andrew Barton and Danielle Sassoon.