Allergan Weighing Shire Bid Has Investors Worried About Deja Vu

(Bloomberg) -- Allergan Plc investors have been waiting for the drugmaker to make a bold move after the shares took a beating over the past year, but a potential bid for Shire Plc may not be the deal they wanted.

Chief Executive Officer Brent Saunders said on a call with investors in March that Allergan was “going to consider every option” to create value. But given the recent history of failed mega-mergers -- including Allergan and Pfizer Inc. in 2016 -- Cowen & Co. analyst Ken Cacciatore said a potential tie-up with Shire “evokes painful memories.”

Shares of Allergan fell as much as 8.5 percent, their biggest drop since that Pfizer blowup two years ago, as an offer for Shire would potentially set up a bidding war with Takeda Pharmaceutical Co. The stock pared losses after CNBC reported that a bid wasn’t coming, according to people familiar.

While buying Shire makes sense strategically, splitting up Allergan’s business or even just taking a wait-and-see approach are options that would give management more control of the process, Cacciatore wrote in a note to clients. Even so, William Blair’s Tim Lugo cautions that “Shire’s availability may be too attractive for management at Allergan to pass up.”

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