AbbVie Strikes Deal to Buy Allergan for About $63 Billion

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Acquiring Allergan delivers a dominant position in the $8 billion-plus market for Botox and other beauty drugs.

AbbVie Inc. ABBV -0.42% has reached a deal to buy Allergan AGN -0.95% PLC for about $63 billion, as the two big drugmakers bet a combination will deliver new sources of growth they have struggled to find on their own.

The takeover is worth about $188 a share in cash and stock, the companies said in a statement. The price represents a 45% premium over Allergan’s closing share price Monday of $129.57. If not for a surge in the shares in recent days on expectations for a breakup of the company, the premium would be even bigger.

The Wall Street Journal reported earlier Tuesday that the deal was imminent.

Buying Dublin-based Allergan would deliver a dominant position in the $8 billion-plus market for Botox and other beauty drugs, as well as a number of popular eye treatments, as AbbVie braces for the end of patent protection for the world’s top-selling drug, Humira.

The companies’ portfolios have some overlap in treatments for brain, women’s-health, stomach and other disorders, though the combination would take AbbVie into the new realm of frown-line smoothing, eyelash lengthening and double-chin removal.

Allergan’s nearly $16 billion in yearly revenue would also give AbbVie another source of cash to hunt for a new generation of products.

Lately, Wall Street has been clamoring for change at Allergan, with its shares trading at a fraction of their peak of more than $330 in the summer of 2015. Analysts have been saying the company could split into two pieces, but few expected CEO Brent Saunders to pull off a sale, especially at such a lofty premium.

Richard Gonzalez will remain chairman and CEO of AbbVie. Two Allergan directors including Mr. Saunders will join AbbVie’s board when the deal closes.

About two-thirds of the purchase price is in cash, with Allergan stockholders receiving 0.8660 AbbVie shares and $120.30 in cash for each share they own, for total consideration of $188.24 a share.

Allergan stock surged 29% premarket on the news while AbbVie shares fell more than 8% to $78.45.

The deal, worth about $80 billion including debt, is the second this year that would knit together two of the world’s biggest pharmaceutical companies. Earlier this year, Bristol-Myers Squibb Co. agreed to pay $74 billion for rival cancer drugmaker Celgene Corp.

AbbVie, based in the Chicago suburbs, has been pursuing deals of various sizes in an effort to diversify beyond Humira ever since the company was split from Abbott Laboratories in 2013.

Humira, a rheumatoid arthritis treatment, rang up $19.1 billion of AbbVie’s $32.8 billion of revenues last year. But lower-priced versions, known as biosimilars, are on sale in Europe and are scheduled to go on sale in the U.S. in 2023.

AbbVie had tried to strike a big deal in 2014, when it reached an agreement to buy Irish rare-disease drugmaker Shire for $54 billion. But AbbVie called off the deal later that year amid efforts by the Obama administration to restrict such tax-lowering transactions, known as inversions.

Other attempts to find new big-selling cancer, immune and other drugs have also stumbled, except for a roughly $20 billion deal in 2015 for Pharmacyclics Inc., the maker of the Imbruvica cancer therapy. AbbVie shares the treatment’s rights with Johnson & Johnson .

But Imbruvica, which generated $3.6 billion in revenue for AbbVie last year, can’t alone make up for the approaching loss of Humira sales.

In Allergan, AbbVie will take on a once-highflying drugmaker that has also struggled to find new sales growth.

Allergan’s shares soared to more than twice their current level four years ago as the company and Mr. Saunders became Wall Street darlings following a series of bold acquisitions. But Allergan’s luster has faded in the last few years as opportunities for deal making have dwindled along with the stock and only its aesthetic-medicine business grew to investors’ satisfaction.

Allergan, which started as a California pharmacy and then carved a niche as an eye-treatment business, rocketed into the ranks of big drugmakers after exploiting Botox’s use smoothing frown lines and wrinkles.

A combination with Irish drugmaker Actavis in 2015 transformed the company. Mr. Saunders has been CEO since 2014 and chairman since 2016.

For a time, Pfizer Inc. was going to buy Allergan for about $150 billion, but that transaction, also an inversion, fell through amid pushback from the Obama administration.

Then investors soured on the company, partly due to concerns that it wouldn’t be able to replace sales from eye drug Restasis, which was losing its patent protection.

Investors also drove down the stock on a failed plan to bolster Restasis by selling its patent rights to an Indian tribe, as well as mixed messages from management about the company’s prospects. Rivals are trying to edge in on Botox, and the company’s efforts to develop new drugs, like a depression treatment, faltered.

The concerns triggered pressure from Wall Street. Mr. Saunders said on the company’s earnings call last month that there is a sense of urgency within the company and pledged that the board was reviewing all options.

Analysts predicted Allergan could split itself in two, with one business dedicated to fast-growing brands and segments such as aesthetics and eye care, and the other focused on gastrointestinal and women’s-health treatments.

Allergan in recent years came in the crosshairs of David Tepper’s activist hedge fund Appaloosa LP, which criticized the company’s performance and pressured it to separate the roles of chairman and CEO. The company had said it would separate the roles at its next leadership transition. In May, Allergan shareholders voted down a shareholder proposal from Appaloosa to separate the positions.

Also to satisfy investors, Allergan in the past year tried to sell its women’s health and anti-infective drug businesses but said in January it would keep the unit.

Write to Cara Lombardo at, Jonathan D. Rockoff at and Dana Cimilluca at