Ackman Says Allergan Is A Good Merger Arbitrage Play; Sees 28% Upside To Deal Closing Price

Pershing Square’s CEO Bill Ackman spoke at Bloomberg TV on Wednesday, December 17, discussing several issues, including Herbalife Ltd.’s HLF pyramid scheme, Allergan, Inc. AGN, Fannie Mae, Freddie Mac, Canadian Pacific Railway Limited (USA) CP and McDonald's Corporation MCD.

About a month ago, Ackman expressed his support for the Allergan-Actavis plc ACT deal, and to Actavis’ CEO, Brent Saunders. As the deal becomes more tangible (Ackman sees it as highly probable), he once more recommended buying Allergan’s stock. Assuming the transaction closes at the expected price, the upside potential surrounds 28 percent.

Ackman seemed pretty happy with the outcome regarding Allergan: “Our focus always is doing the best we can for the shareholders of the companies in which we invest; our franchise depends on maximizing value for other shareholders, and that’s how we ultimately do well for ourselves,” he stated.

In this case, the stock, which was at $125.00 when it started with Ackman's fund, is now at more than $206.00. A value of $30 billion was created over the course of one year. The favorite candidate for a merger back then was Valiant, and Actavis was not even considered. But, as the latter bought Forest Laboratories, Inc. FRX, and the former was not prepared to pay as much for Allergan as it was really worth, this changed.

Apparently, Ackman and his team are still giving due diligence to Actavis, trying to work out a deal that benefits all shareholders.