An early look at Actavis PLC’s plans to integrate its $68 billion acquisition of Allergan Inc. signals that operations executives from the Irvine-based drugmaker will maintain a strong presence in the combined company.
The legacy contingent won’t include Allergan’s corner office cadre—titles such as chief financial officer, chief legal officer, and chief of research and development will be absorbed by Actavis executives or go to new recruits for the combined company.
The view a level down—a tier of management Actavis Chief Executive Brent Saunders calls the “commercial leadership” of the company—is decidedly different. Saunders shared some details of the integration plan for the rest of the combined company last week in San Francisco at a JPMorgan healthcare conference.
He used a color-coded flowchart of the combined company’s “commercial team” showing the names of legacy Allergan executives in blue boxes and Actavis executives in green boxes to illustrate a key point (see chart, this page).
“What you’ll see is that there is one more blue box than green box,” said Saunders, who will head the combined company after the deal’s expected second-quarter close.
Pyott
One name not in the boxes: Allergan Chief Executive David Pyott, who has said he might join Actavis’ board after the deal closes.
But Pyott has had a hand in crafting the future of the combined company alongside Saunders, who said the near parity between Allergan and Actavis in terms of executive slots at the operational level stems from a focus on merit rather than any purposeful effort toward balance between the companies.
“…We didn’t design this—David Pyott and I didn’t sit down and say we’ve got to get to a 50-50,” Saunders said. “We said let’s put the best people in the room.”
Allergan executives will hold executive vice president titles at Actavis and serve as presidents of two of four commercial units, with both reporting to Saunders. Philippe Schaison will be president of the Allergan Medical business unit; and Paul Navarre will serve as president of International Brands.
Actavis executives will run the other two divisions, with Bob Stewart president of Generics and Global Operations and Bill Meury president of Branded Pharma (see chart).
The companies said in a Securities and Exchange Commission filing that they announced the proposed senior leadership structure early—about a month after the deal announcement and several months before the anticipated date of its completion—for several reasons, including reinforcing “our commitment to bringing forward top talent of both companies.”
Next up, according to Saunders, is a plan for how the research and development operations of the two companies—an area of business targeted for an estimated $400 million in cuts—will mesh. Those plans are expected to be unveiled “in coming weeks,” he said.
The SEC filing shows Actavis has taken several steps toward the ultimate combination besides naming the company’s executive team. It notes that work on the Allergan integration kicked off shortly after the Nov. 18 deal announcement.
A steering committee was formed, and integration activities formally started during meetings of company representatives between Dec. 15 and 17 in Florham Park, N.J., near Actavis’ operating headquarters of Parsippany, N.J.
Allergan President Douglas Ingram; Jim Hindman, executive vice president of finance and business development; Scott Sherman, executive vice president, human resources, and Patel are part of the integration steering committee.
Only Patel and Ingram, who is set to be a special adviser to Saunders, have been identified as executives expected to stay on with the combined company.
Actavis said in its filing that integration development “will pick up in earnest following the holiday.”
Third Phase
The third phase is “implementation and continued design.” Actavis said that would start in the weeks leading up to the acquisition’s intended closing in the second quarter. Functions in the phase include installing leaders and merging information technology, communications and operations.
The drugmaker said the third phase also includes “the rollout of our combined company name” as part of that plan.
“Since late 2009, Actavis has dramatically transformed itself, in part by maximizing the value of several strategic combinations,” Actavis said in its filing.
The filing also alludes to a pet concern of Saunders—how integrating two companies affects the rank-and-file involved. Allergan and Actavis now employ about 36,000 workers between them; Saunders and Pyott have mentioned redundancies but haven’t said how many cuts will come in the deal.
“We recognize the stress that integrations can have on employees and provide various forums for you to submit your concerns [and] feedback and obtain additional information,” Actavis said, adding that it plans to publish a regular employee newsletter discussing the Allergan integration.
