CHICAGO, April 25, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includethe Allergan, Inc. (NYSE:AGN-Free Report), Valeant Pharmaceuticals International, Inc. (NYSE:VRX-Free Report), BP plc (NYSE:BP-Free Report), ExxonMobil Corp. (NYSE:XOM-Free Report) and Chevron Corp. (NYSE:CVX-Free Report).
Shares of Allergan, Inc. (NYSE:AGN-Free Report) gained 15.2% after Valeant Pharmaceuticals International, Inc. (NYSE:VRX-Free Report) and Pershing Square Capital Management, L.P made a formal proposal to acquire the former.
Valeant proposed that each Allergan share would be exchanged for $48.30 in cash and 0.83 shares of Valeant common stock. Shares of Valeant were up 7.5% on the proposal. The proposal allows shareholders to elect a mix of cash and shares.
The offer will allow Allergan shareholders to own approximately 43% of the combined company.
We note that Pershing Square Capital Management is the largest shareholder at Allergan with a 9.7% stake. Pershing Square Capital Management is in favor of the acquisition and has agreed to elect for only stock consideration in the transaction.
Details of the Transaction
Valeant targets operational synergies of $2.7 billion from costs, with 80% targeted in the first six months while the remaining 20% is targeted in the following 12 months.
Post completion of the transaction, Valeant expects to initiate an annual dividend of $0.20 per share, in line with the current dividend at Allergan.
Concurrent with the acquisition proposal, Valeant updated its guidance for 2014. Valeant increased its revenue guidance for 2014. The company now expects revenues to come between $8.3 billion and $8.7 billion in 2014, up from the earlier estimate of $8.2–$8.6 billion. Earnings per share, on a cash basis, is now projected between $8.55 and $8.80, up from $8.25–$8.75.
Allergan, a global multi-specialty pharmaceutical company, develops and commercializes innovative products for eye care, neurological, medical aesthetics, medical dermatology, breast aesthetics, urological and other specialty markets.
Allergan's key product is Botox which generated revenues of $1.98 billion in 2013, thereby representing almost 32% of net product sales. Botox is approved for certain therapeutic and aesthetic indications.
Meanwhile, Valeant, a Canada-based specialty pharmaceutical company, has been quite aggressive on the acquisition front in the last two years contributing to its solid growth. Dermatology is the key focal area for Valeant.
In Apr 2013, Valeant acquired Obagi Medical Products. Obagi Medical Products sold products to prevent or improve the most common and visible skin disorders. In Dec 2012, Valeant acquired all of the outstanding common stock of Medicis Pharmaceutical Corporation, which focused on the development and marketing of products for the treatment of dermatological and aesthetic conditions in the U.S.
Apart from dermatology, Valeant is also keen on developing its portfolio in the ophthalmology arena as well. In Aug 2013, Valeant acquired Bausch + Lomb Holdings Inc. for $8.7 billion in cash.
We believe the combined company will have a stronger presence in ophthalmology, dermatology, and aesthetics.
Valeant expects to generate 75% of the total revenue from durable products. As per Valeant, 90% of the revenue of the combined company is not expected to face any patent cliffs over the next decade.
However, Allergan has made it clear that it is reluctant to accept Valeant's offer.
We expect investor focus to remain on further updates from Valeant and Allergan on the acquisition proposal.
Allergan currently carries a Zacks Rank #2 (Buy) while Valeant is a Rank #3 (Hold) stock.
BP Farms Out 4 Alaskan Fields
UK oil and gas supermajor BP plc (NYSE:BP-Free Report) has decided to farm out four operated oilfields on the North Slope of Alaska to privately held Hilcorp. The parties, however, did not reveal the financial terms of the transaction.
The sale agreement comprises the entire interest of BP in the Endicott and Northstar oilfields and a 50% stake in each of the Liberty and the Milne Point fields. Included in the agreement is BP's interest in the oil and gas pipelines related to these fields.
BP owns nearly 100% interest in all the fields related to the sale. Located about three miles offshore, Endicott is an exception where ExxonMobil Corp. (NYSE:XOM-Free Report) and Chevron Corp. (NYSE:CVX-Free Report) hold 21% and 11%, respectively.
The transaction will facilitate BP to form a more competitive and viable business in Alaska as well as help it in utilizing its greatest strengths of managing giant fields and gas value chains. BP intends to concentrate on the development and production from the giant Prudhoe Bay field and work on the progress of future opportunity of Alaska LNG.
BP's position as operator and co-owner of the Prudhoe Bay and its other stakes in Alaska remains unaffected consequent to the agreement. The transaction, subject to regulatory approval, will enable Hilcorp to become the operator of the Endicott, Northstar and Milne Point oilfields and their associated pipelines and infrastructure.
BP, which retains the operatorship of Liberty, is expected to submit a development plan for it by the end of 2014. Discovered in 1997, Liberty is estimated to hold estimated recoverable reserves of 100 million barrels of oil. The work on the field was suspended in 2012 due to huge cost overruns.
BP's plan for Prudhoe Bay oilfield involves the addition of a pair of drilling rigs – one in 2015 and another in 2016, respectively. Over the next five years, the company plans to spend $1 billion more.
The sold assets together represent about 19,700 barrels of oil equivalent per day of net production, or around 15% of BP's total net production on the North Slope.
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