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A protracted bidding war for Allergan (AGN) Inc. came to a close last month when Actavis Plc swooped in to clinch the deal for $66 billion. Options traders are concerned more twists are coming.
They?ve increased protection in Allergan in case Actavis itself becomes a target and the deal falls apart, says Keith Moore at MKM Partners LLC. Bearish puts in the maker of Botox cost the most ever versus bullish calls, data compiled by Bloomberg show.
Valeant Pharmaceuticals International Inc. (VRX) spent months in a hostile battle before Actavis trumped its offer in November. Allergan has been one of 2014?s best bets, with shares almost doubling. But merger arbitragers have been burned before when acquirers became surprise targets, and Pfizer Inc. (PFE) is on the hunt and was said to have approached Actavis before.
?The arbitrage community doesn?t want to get killed again with this one,? Moore, head of event-driven strategy at MKM, said by phone from Stamford, Connecticut. ?There have been stories about Pfizer engaging in talks with Actavis. You?ve had a few instances this year where the acquirer became the target, and suddenly you were losing money on both your long and your short. You want to be careful.?
After losing out on its 69.4 billion pounds ($109 billion) bid for AstraZeneca Plc in May, Pfizer has said the U.S. government?s threats to limit tax-driven deals won?t stop the company from seeking tax havens overseas. Actavis?s tax domicile in Ireland makes it an attractive takeover target.
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