Allergan, a Valeant Takeover Target, Plans 1,500 Job Cuts

Allergan, Inc., AGN, which is currently being pursued by Valeant Pharmaceuticals VRX, announced restructuring initiatives that will see the company cutting its work force by 13% (1,500 employees). 250 vacant positions will also be eliminated. Shares were up 2.23% on the restructuring news as well as better-than-expected second quarter results and a raised guidance.

The company stated that approximately 94% of all customer-facing personnel will be unaffected by the restructuring.
 
The restructuring plan will be carried out over the rest of the year and is expected to deliver annual pre-tax savings of approximately $475 million in 2015. Allergan plans to streamline its organizational structure and focus on high value opportunities.
 
The company plans to reduce its expenditure related to the commercial organization, general and administrative functions, manufacturing and the R&D organization. These reductions are expected to have a modest impact on net sales growth. The company has reiterated its double-digit sales growth target for the period 2014 to 2019. Allergan expects to deliver an earnings growth rate of more than 20%.

Allergan expects 2014 earnings of $5.74–$5.80 per share. The Zacks Consensus Estimate is currently at $5.74 per share. Allergan estimates earnings per share in the range of $8.20–$8.40 and approximately $10.00 in 2015 and 2016, respectively. Currently, the Zacks Consensus Estimate for 2015 stands at $8.30 per share, within the guided range.

At present, we expect investor focus to remain on further updates from Valeant and Allergan on the acquisition proposal. Allergan had rejected Valeant's revised acquisition offer.
 
Allergan carries a Zacks Rank #2 (Buy). Investors can also consider stocks like AstraZeneca AZN and AbbVie Inc. ABBV carrying the same rank as Allergan.