Stock Market History Made By Actavis PLC (ACT)
Actavis plc (NYSE:ACT) has made stock market history with its massive fundraiser. The Dublin-based pharmaceutical is fundraising for the acquisition of Botox maker, Allergan, Inc. (NYSE:AGN). Actavis offered to buy out Allergan for $66 billion, trouncing rival bids.
The acquisition of Allergan is expected to close over the next few weeks. Actavis plc (NYSE:ACT) has turned to the stock market to raise funds for the deal. The company announced the offering of about $4.5 billion in convertible preferred shares and another $3.7 billion of ordinary shares.
With the massive offering, Actavis will become the first company in nearly five years to raise such a huge amount of cash through convertible offerings since General Motors Company (NYSE:GM)’s $5 billion in 2010. Still, Actavis’ convertible offering will be the largest in the history of the health care sector.
Companies that have performed such huge convertible offerings are usually the big banks, giant automakers and insurance companies.
Actavis plc (NYSE:ACT)’s $3.7 billion in ordinary shares offerings is also the largest since December 2013, when Facebook Inc (NASDAQ:FB) raised $3.9 billion in the same way.
If Actavis fails to close the acquisition deal with Allergan, the funds raised through the ordinary and preferred shares offering will be channeled to general corporate purposes.
Emerging trend in pharmaceutical
A trend is emerging in the pharmaceutical industry where companies are bolstering or replacing internal R&D through acquisitions. According to industry experts, using acquisitions to replace internal R&D could result in skyrocketing valuations and a competitive buyout market.
There are huge expectations that Actavis plc (NYSE:ACT) will be able to successfully integrate Allergan into its system. However, if the company fails in successfully integrating Allergan, or misses good targets in the future, it could be hard for it to raise money from the market in the future.
Actavis plc (NYSE:ACT) trounced Bill Ackman and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) in the buyout contest for Allergan. Ackman’s side had launched an activist approach to the acquisition of Allergan, but such efforts flopped with Actavis’ sweeter offer.
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