AbbVie is to acquire Allergan in a ‘transformative transaction’

It has been announced that AbbVie will acquire Allergan in a cash and stock transaction. This has been agreed for a transaction equity value of approximately $63 billion, based on the closing price of AbbVie’s common stock of $78.45 on 24 June 2019. 

“This is a transformational transaction for both companies and achieves unique and complementary strategic objectives,” said Richard A Gonzalez, Chairman and Chief Executive Officer, AbbVie. “The combination of AbbVie and Allergan increases our ability to continue to deliver on our mission to patients and shareholders. With our enhanced growth platform to fuel industry-leading growth, this strategy allows us to diversify AbbVie’s business while sustaining our focus on innovative science and the advancement of our industry-leading pipeline well into the future.”

AbbVie has stated that this acquisition will have a number of positive results including new growth platforms and leadership positions to diversify and expand revenue base; the immediate scale and enhanced profitability for AbbVie’s growth platform; immediate EPS accretion; and significant cash flow generation.

AbbVie will continue to be led by Richard A Gonzalez as Chairman and Chief Executive officer. Two members of Allergan’s Board, including chairman and chief executive officer, Brent Saunders, will join AbbVie’s Board upon completion of the transaction.

“This acquisition creates compelling value for Allergan’s stakeholders, including our customers, patients and shareholders. With 2019 annual combined revenue of approximately $48 billion, scale in more than 175 countries, an industry-leading R&D pipeline and robust cash flows, our combined company will have the opportunity to make even bigger contributions to global health than either can alone,” added Brent Saunders, Chairman and Chief Executive Officer, Allergan. “Our fast-growing therapeutic areas, including our world class medical aesthetics, eye care, CNS and gastrointestinal businesses, will enhance AbbVie’s strong growth platform and create substantial value for shareholders of both companies.”

AbbVie anticipates that the acquisition will provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three while leaving investments in key growth franchises untouched.

The synergies and other cost reductions will be a result of optimising the research and early stage portfolio, and reducing overlapping R&D resources (~50 percent), driving efficiencies in SG&A, including sales and marketing and central support function costs (~40 percent), and eliminating redundancies in manufacturing and supply chain, and leveraging procurement spend (~10 percent).