Allergan’s (AGN) share price has been rather volatile over the past six weeks. The stock hit a 52-week low of around $143 in early March and bounced back immediately. It is now up 15% since that period. In early April management announced it was seeking options for its women’s health unit, including a sale:
Allergan Plc is considering options for its women’s health unit, including a sale, Bloomberg reported on Monday, citing people with knowledge of the matter. A sale, which would likely attract interest from private equity firms, could value the business at more than $5 billion, according to the Bloomberg report. The women’s health unit, which makes oral contraceptive pills to menopause treatment, raked in $1.04 billion sales in 2017.
A decision pursuant to a sale apparently has not been made yet. I interpret this as an attempt to protect the stock if interest is far less than the $5 billion number being bantered around. Nonetheless, the company is more than willing to use the sale as a catalyst to spur the stock.
Chatter suggests AGN is seeking $5B for its women’s health unit, equating to around 11x EBITDA. The arrival of generic Estrace could create a diminution in the unit and dent the purchase price. AGN wants mullet money to buy women’s health for 11x EBITDA when the total company could be fairly valued at 7x-8x EBITDA. Once LOE for Estrace and Restasis kick in I expect AGN to retest its 52-week low.