Allergan Inc. is running out of ways to avert a takeover by Valeant Pharmaceuticals International Inc.

The $53 billion Botox maker’s defensive options were to acquire smaller drugmaker Salix Pharmaceuticals Ltd. or merge with similar-sized peer Actavis Plc. Now, in what may be Allerganmanagement’s worst-case scenario, Salix and Actavis are in deal talks. It puts Valeant at an advantage, unless Allergan breaks up those talks, finds another target or announces share repurchases or a dividend. Allergan is up against a deadline because shareholders will hold a vote Dec. 18 on whether to remove its board members.

“From the time of Valeant’s bid to the time Allergan has the special meeting, if Allergan doesn’t do anything to use that capital, they’ll have a lot of frustrated shareholders,” Annabel Samimy, a New York-based analyst at Stifel Financial Corp., said in a phone interview. “That’s why it tips in Valeant’s favor.”

There aren’t many other takeover candidates that would move the needle for Allergan, she said. Its investors are already pushing back on a Salix deal, so they probably wouldn’t support Allergangetting into a bidding war for the company. Analysts have said Salix is a better fit for Actavis anyway, because both companies make gastrointestinal remedies, while Allergan focuses on Botox and eye-care products.

“The likelihood of Allergan buying Salix is becoming more distant,” Neil Maruoka, a Toronto-based analyst at Canaccord Genuity Corp., wrote in a Sept. 29 note. “Actavis is a much more logical buyer.”

A representative for Allergan declined to comment, referring to the company’s Sept. 29 statement that said it’s committed to enhancing shareholder value.

Allergan’s fate has implications for some $600 billion of companies with deals in the works across the pharmaceutical industry because all of the pending mergers have become entangled. And whichever companies are left out of this round could wind up as either buyers or targets in the next. If it sounds complicated, that’s because it is.

“There are almost infinite permutations,” Ronny Gal, a New York-based analyst at Sanford C. Bernstein & Co., said in a phone interview. “Someone’s always going to be left on the side.”

If Actavis gets tied up in this deal, Pfizer Inc. may have to remove the $62 billion company from its list of back-up plans after AstraZeneca Plc rejected the drug giant’s takeover offer earlier this year. New York-based Pfizer had approached Actavis as it continues to look for an alternative deal that will cut the $184 billion company’s tax rate and give it a new product pipeline, people with knowledge of the matter said this month.

AbbVie Inc. -- after it completes its purchase of Shire Plc -- would be another possible tax-inversion candidate for Pfizer, according to Ken Cacciatore, a New York-based analyst at Cowen Group Inc.

Amgen Inc., a $104 billion biotechnology company that makes treatments for cancer and kidney disease, could even get swept up in the takeover frenzy. Valeant could pursue it after completing anAllergan acquisition, Cacciatore wrote in a Sept. 26 note.

Valeant, the most acquisitive drugmaker of the past four years, teamed up with Bill Ackman’s Pershing Square Capital Management LP to bid for Allergan in April. Pershing is Allergan’s largest shareholder.

Valeant’s offer is a mix of cash and stock, so it fluctuates in value. At the time of the announcement, the offer represented a 46 percent premium. Yesterday, it was worth $177 a share, and Allergan’s stock closed at $176.86.

While Allergan continues to say the proposal is “grossly inadequate,” Laval, Quebec-based Valeant has said it’s willing to negotiate.

Today, Allergan shares rose 2.5 percent to $181.25 at 11:50 a.m. in New York. Salix gained 2.3 percent to $154.54 and Valeant climbed 1.3 percent to $128.64.

Actavis was also said to be interested in buying Allergan and approached the company in August with an offer that wasn’t much higher than Valeant’s, a person with knowledge of the matter said earlier this month.

Allergan’s effort to acquire Salix stalled in recent days over price concerns and after Allergan’s shareholders reacted negatively to the idea, people with knowledge of the matter said yesterday. Salix is in talks to sell itself to Actavis instead and an agreement between the two has become more likely in the past week, the people said.

Salix, whose top-selling drug is Xifaxan, a treatment for travelers’ diarrhea, had a $9.6 billion market value yesterday.

Don’t write off an Actavis-Allergan deal or a Salix- Allergan deal just yet, says Ken Cacciatore, a New York-based analyst for Cowen Group Inc.

Actavis could be the “most natural, thoughtful, strategic alternative” for Allergan now, if Allergandoesn’t make a “value-enhancing capital allocation decision,” Cacciatore wrote in a note to clients today. Actavis would probably need to make an all-cash offer for $200 to $210 a share, he said. That’s at least 11 percent more than the current value of Valeant’s bid.

He interprets the latest news as Allergan potentially having made its best and final offer for Salix, and so Salix is make a last attempt to drum up any other possible bids. He still sees Allergan as the most likely acquirer of Salix in the end because it’s probably willing to pay more than any other suitors.

Allergan shareholder Pentwater Capital Management LP last week urged the company to engage Valeant or other possible suitors before buying Salix. T. Rowe Price Group Inc., the third-largest owner of Allergan, said any acquisition the company makes should be put to a vote, even all-cash deals that normally don’t require one. Institutional Shareholder Services Inc., an investor-advisory firm, echoed that sentiment.

“We have a ticking clock here because there’s the meeting that’s scheduled for Dec. 18,” Liav Abraham, an analyst for Citigroup Inc., said in a phone interview. “Given that it’s involved in a number of scenarios, that will determine what happens to Allergan and therefore what other companies end up doing, too.”


--With assistance from Jeffrey McCracken and David Welch in New York.

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