As per market rumors, Actavis (ACT - Analyst Report) is closing in on a deal to acquire Allergan Inc. (AGN - Analyst Report) for over $65.5 billion. The rumors are expected to be confirmed soon.

Actavis to Outplay Valeant?

As per the sources, Actavis has agreed to pay $215 to $220 per share for the Botox maker. Actavis’ offer price, if it stands to be true, will exceed Allergan’s other pursuer Valeant Pharmaceuticals International, Inc.’s (VRX - Analyst Report) latest offer (in Oct 2014) of $200 per share.

The $200 per share offer from Valeant was rejected by Allergan on grounds that it substantially undervalued the company. Allergan has repeatedly rejected Valeant’s offers since Apr 2014. If sources are to be believed, Actavis’ rumoured $65.5 billion offer for Allergan is now beyond the reach of Valeant. Valeant is now rumoured to be eyeing animal health company Zoetis (ZTS - Analyst Report) as it loses hope of acquiring Allergan.

Last week, a report from Bloomberg stated that Actavis was in talks to acquire Allergan for a deal worth at least $60 billion. The report further stated that Allergan was demanding more than $210 per share to get acquired (read more:Will Actavis Snatch Allergan, Valeant Settle for Zoetis?).

Actavis is known for big acquisitions having successfully clinched big deals in the past. It has acquired companies like Warner Chilcott ($8.5 billion, Oct 2013) and Forest Laboratories ($25 billion, Jul 2014). Actavis also expressed interest in continuing with its acquisition spree to expand its business. Currently, Actavis is acquiring Durata Therapeutics, Inc. (DRTX - Snapshot Report) for around $675 million plus contingent value rights. Hence, the Allergan deal (if successful) will be in sync with its business expansion plans.

Our Take

Allergan’s shares have gained around 40% ever since Valeant made its first offer. We expect investor focus to remain on further updates on this situation.

Both Actavis and Allergan currently carry a Zacks Rank #2 (Buy) while Valeant sports a Zacks Rank #1 (Strong Buy).

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