Shares of Botox maker Allergan (AGN) surged nearly 21% during Monday’s after-hours session on news that hedge fund manager Bill Ackman has taken a stake of 9.7% in the California-based company and is teaming up with Valeant Pharmaceuticals (VRX) to make a takeover offer.
Valeant is no stranger to sizable deals, having previously acquired Bausch & Lomb for $8.7 billion and Medicis for $2.6 billion. Ackman said he supports Valeant’s efforts to possibly acquire Allergan, which had a market value of $42.38 billion at Monday’s close.
News of a possible Allergan takeover comes after some health care and pharmaceuticals ETFs rose on reports that Pfizer (PFE) approached British rival AstraZeneca (AZN) about a possible marriage valued at $101 billion. [ETFs for the New Pharma M&A Rumor]
Speaking of ETFs, there are few that could be in play assuming the Allergan speculation continues and, more importantly, leads to a legitimate offer. Take the iShares U.S. Pharmaceuticals ETF (IHE) as a prime beneficiary of a takeover of Allergan. According to S&P Capital IQ, a scant number of ETFs feature Allergan among their top-10 holdings, but the $632.6 million IHE is one of those funds.
Allergan is the ETF’s sixth-largest holding at a weight of 5.7%. The ETF is no stranger to mergers and acquisitions news, having benefited earlier this year from news of generic drugmaker Actavis (ACT) acquiring rival Forest Laboratories (FRX) for $25 billion. Both of those stocks are top-10 holdings in IHE. [A Fantastic Pharma ETF]
Another ETF to consider is the Market Vectors Pharmaceutical ETF (PPH) . Given the recent mergers and acquisitions scuttlebutt in the pharmaceuticals industry, the $309.8 million PPH is an ETF to keep an eye on. The ETF’s combined weight to Allergan and Valeant is 8.7%.
Not only that, but PPH allocates a combined 11.5% of its weight to Pfizer and Astra. Earlier this year, it was reported that Teva Pharmaceuticals (TEVA), the world’s largest maker of generic drugs, could be a takeover candidate as well. Teva accounts for nearly 4.8% of PPH’s weight. [Teva Takeover Would Lift This ETF]
At a weight of 3.75%, Allergan is the third-largest holding in the $804.4 million SPDR Pharmaceuticals ETF (XPH) .
Market Vectors Pharmaceutical ETF
Tom Lydon’s clients own shares of Pfizer.