
Allergan (AGN), Pfizer in Advanced Takeover Talks, Stocks Fall, Jim Cramer Weighs In
NEW YORK (TheStreet) -- Allergan (AGN) - Get Report and Pfizer (PFE) are accelerating their takeover talks in a deal that could be valued as high as $150 billion, Bloomberg reports.
However, while the agreement could be announced as soon as Monday, investors are concerned that the deal could be delayed by the Treasury Department's letter on tax inversion deals.
Shares of Allergan are sliding 1.67% to $305.60 and shares of Pfizer are retreating 1.08% to $32.95 in pre-market trading on Thursday.
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio commented in an article titled 'Comments Drain Allergan's Gains' on Wednesday saying: "Treasury Secretary Jacob Lew informed lawmakers today that his department will be releasing "targeted guidance" at some point later this week aimed at deterring tax inversions (i.e., where companies shift their domicile to a foreign country for tax benefits)."
"Lew made a point to call out in the note that 'Treasury cannot stop inversions without new statutory authority' and 'only legislation can decisively stop inversions,' meaning that Congress must take action for a change to take place."
"The potential for action against inversions is, of course, crushing Allergan in the after-hours trading, erasing all the gains from today's [Wednesday's] session. Investors are worried that an impending law or sanctions could ultimately deter Pfizer from making a bid for the Botox maker, as it was believed the merged company would locate its base operations in Allergan's current country of domicile, Ireland, where corporate taxes remain low compared to the United States."
Pfizer is looking to buy between the price range of $370 to $380 for each Allergan share, according to Reuters.
It the deal goes through, it would be the biggest acquisition this year in any industry, Bloomberg noted.
The takeover would strengthen Allergan, which makes anti-wrinkle injection Botox and Alzheimer's drug Namenda. Pfizer's drug business would also benefit from this deal as well.
Separately, TheStreet Ratings team rates ALLERGAN PLC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ALLERGAN PLC (AGN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AGN's very impressive revenue growth greatly exceeded the industry average of 3.7%. Since the same quarter one year prior, revenues leaped by 90.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- ALLERGAN PLC has improved earnings per share by 46.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLERGAN PLC reported poor results of -$8.65 versus -$5.43 in the prior year. This year, the market expects an improvement in earnings ($15.33 versus -$8.65).
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AGN's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.
- Compared to other companies in the Pharmaceuticals industry and the overall market, ALLERGAN PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: AGN








