Are Allergan Shareholders Getting Enough in the AbbVie Acquisition?

Allergan PLC (NYSE: AGN) shares jumped on Tuesday after the company announced that it would be acquired by AbbVie Inc. (NYSE: ABBV | ABBV Price Prediction) in a cash and stock transaction. The transaction is valued at roughly $63 billion, based on AbbVie’s most recent closing price of $78.45.

Under the terms of the transaction agreement, Allergan shareholders will receive 0.8660 AbbVie shares and $120.30 in cash for each Allergan share that they hold, for a total consideration of $188.24 per Allergan share.

Based on Allergan’s closing price on Monday ($129.57), the transaction price implies a premium of about 45%.

It is expected that, immediately after the closing of the acquisition, AbbVie shareholders will own roughly 83% of AbbVie on a fully diluted basis and the Allergan shareholders will own about 17% of AbbVie on a fully diluted basis.

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Looking ahead, AbbVie is expected to generate significant annual operating cash flow, which will support a debt reduction target of $15 billion to $18 billion before the end of 2021, while also enabling a continued commitment to Baa2/BBB or better credit rating and continued dividend growth.

Richard A. Gonzalez, board chair and chief executive of AbbVie, commented:

This is a transformational transaction for both companies and achieves unique and complementary strategic objectives,” “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.

Shares of AbbVie traded down about 15% at $66.90 apiece on Tuesday, in a 52-week range of $66.00 to $100.23. The consensus price target is $90.07.

Allergan was up nearly 27% at $164.27 per share, with a 52-week range of $114.27 to $197.00.

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