Allergan plc AGN 4.34% shares popped 5.6 percent Thursday on news of a possible stake by Carl Icahn. Attention from the activist investor would heighten the pressure for a strategic shift that’s already being applied by Appaloosa and Senator Investment Group.
The Rating
Bernstein analyst Aaron Gal maintained an Outperform rating with a $232 price target.
The Thesis
Bernstein identifies unrecognized intrinsic value in the stockt that can be attributed more to external events than mismanagement. The potential demands for a board shakeup are futile, in Gal’s view. (See the analyst’s track record here.)
“We do not see the governance at Allergan as particularly faulty (they were willing to sell the company) and while governance improvements are always a good thing and the suggestion by the activists are logical, we do not believe these ideas are material enough to alter the company prospects,” the analyst said in a Friday note.
Gal expects a debate around CEO replacement or segment sales, the latter of which may be premature ahead of readouts for CGRP and rapastinel.
“If these are successful, future growth of the business will be a lot more secure,” Gal said “If they fail, then Allergan will be growth challenged and it would be time to seek breaking up the company as way to unlocking value.”
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