Shares of Botox maker Allergan (NYSE: 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 (NYSE: 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 (NYSE: PFE) approached British rival AstraZeneca (NYSE: 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 (NYSEArca: 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 (NYSE: ACT) acquiring rival Forest Laboratories (NYSE: FRX) for $25 billion. Both of those stocks are top-10 holdings in IHE. [A Fantastic Pharma ETF]