Benchmark Managing Partner Kevin Kelly on AbbVie buying Allergan in a cash and stock deal valued at $63 billion.
AbbVie Inc. announced Tuesday it inked a "transformative" deal to buy Allergan for about $63 billion.
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The pharmaceutical company will be acquired in a cash and stock deal, with the transaction equity value based on AbbVie’s closing stock price of $78.45 on Monday.
"This is a transformational transaction for both companies and achieves unique and complementary strategic objectives," Richard A. Gonzalez, AbbVie’s chairman and chief executive officer, said in a news release. "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,” he added.
Allergan shareholders will receive 0.8660 AbbVie shares and $120.30 in cash for each Allergan share held, for a total consideration of $188.24 per share. The deal is a 45 percent premium of Monday's closing price of Allergan's stock. The deal, including debt, is worth about $83 billion, according to the companies.
The companies expect the deal to close by early 2020.
AbbVie said the deal will expand its portfolio to "include several leadership positions in high-value therapeutic areas and an industry-leading pipeline of next-generation therapies with ensured capacity for continued investment across our innovative pipeline."
AbbVie, the maker of the global blockbuster immune disorder treatment Humira, is facing the expiration of patent protection for the drug, which brought in a staggering $20 billion in sales last year. Allergan is best known as the maker of Botox and other cosmetic treatments.
Industry analysts had been anticipating a move by AbbVie to offset the introduction of generics to an extremely valuable pipeline for the company.
"We are unsurprised by the timing and the target of the deal given (AbbVie's) Humira patent cliff," wrote Citi analyst Andrew Baum.
Shares of Allergan, based in Dublin, Ireland, jumped before the opening bell while AbbVie shares sank.
The Associated Press contributed to this report.