The health care sector has been red hot over the past year, feeding numerous possibilities for mergers and acquisitions. Allergan PLC (NYSE: AGN) decided to strike while the iron was hot and has made moves to acquire Kythera Biopharmaceuticals Inc. (NASDAQ: KYTH), which will greatly help in rounding out its portfolio of facial aesthetics.
Both companies announced that they have entered into a definitive agreement in which Allergan will acquire Kythera in a cash and equity transaction valued at $75 per Kythera share, or roughly $2.1 billion.
The transaction will be payable 80% in cash and 20% in new Allergan shares issued to Kythera stockholders. The acquisition is expected to be breakeven in 2016 and accretive thereafter.
Despite this acquisition, Allergan’s 2015 earnings per share (EPS) forecast provided on May 11 is unchanged. Thomson Reuters has a consensus estimate for 2015 earnings, which calls for $17.85 per share.
JPMorgan is acting as the financial advisor for Allergan, and Goldman Sachs is serving as the financial advisor for Kythera.
Brent Saunders, CEO and president of Allergan, explained the purpose of the acquisition:
The acquisition of KYTHERA is a strategic investment that strengthens our leading global position in aesthetics and continues to position us for long-term growth. Kybella is an exciting new product that offers patients the first and only clinically-proven, non-surgical treatment for submental fullness (excess fat under the chin). As a leader in aesthetics, we know our customers are looking to offer their patients new options beyond traditional facial aesthetics. Kybella will do that while complementing our market leading facial aesthetics portfolio, which includes Botox, Juvederm XC, Juvederm Voluma XC, Latisse and Skinmedica. Kybella is also a pivotal entry point for expanding the use of facial aesthetic products in men, while Kythera’s setipiprant (hair-loss) development program can drive additional long-term value.
Shares of Kythera were up 22% to $74.15 Wednesday morning. The stock has a consensus analyst price target of $64.33 and a 52-week trading range of $29.86 to $74.30. It is worth noting that shares hit an all-time with this acquisition, since they entered the market back in 2012.
Allergan shares were up 0.8% to $301.35, in a 52-week range of $201.91 to $317.72. The consensus price target is $348.65.