On June 23, 2014, the board of directors of Allergan Inc. has unanimously rejected the latest offer by Valeant Pharmaceuticals Inc. to acquire Allergan in a cash and stock deal valued at approximately $53 billion.

Pursuant to the Valeant exchange offer, Allergan said that Allergan stockholders would exchange each share of common stock of the Company for 0.83 shares of Valeant common stock and $72.00 in cash, or subject to proration, an amount of cash or a number of Valeant common shares with the implied value set forth in the exchange offer. Allergan noted that the implied value of the exchange offer is $173.20 per share, based on the closing price of Valeant’s stock on June 20, 2014, which is substantially lower than the initial $179.25 per share implied value of Valeant’s May 30, 2014 re-revised proposal, which also included a contingent value right that is not included in the exchange offer.

“Our board is unanimous in its determination that Valeant’s unsolicited exchange offer is grossly inadequate, substantially undervalues Allergan, and is not in the best interests of Allergan and its stockholders,” said David E.I. Pyott , Allergan’s chairman of the board and chief executive officer, said in a June 23, 2014 statement. “The board strongly recommends that Allergan stockholders reject Valeant’s exchange offer and prevent Valeant from taking control of Allergan at a price that does not appropriately reflect the underlying value of Allergan’s assets, operations and prospects, including our industry-leading position and projected growth opportunities. Allergan has a track record of consistently acting in the best interests of its stockholders and the board continues to be confident that Allergan will create significantly more value than Valeant’s proposal.”

In continuing its efforts to acquire Allergan Inc., Valeant Pharmaceuticals International, Inc. commenced on June 18, 2014, an exchange offer directly to Allergan stockholders for the common stock of Allergan, using the approximately $53-billion proposal Valeant had made on May 30, 2014, which was rejected by the Allergan’s board of directors on June 10, 2014. Under Valeant’s offer, Allergan stockholders would be able to elect to exchange each of their Allergan shares for $72.00 in cash and 0.83 Valeant common shares, or an amount of cash, or a number of Valeant common shares, in each case subject to proration. Valeant also indicated it remains willing to provide shareholders with a contingent value right (CVR) related to the sales of its eye-care DARPin, if Allergan engages in negotiations to work out the exact terms. 

The Valeant offer specifies that the amount of the all cash and all stock elections would be determined prior to the expiration of the exchange offer and would be set so that the implied value of all three elections would be the same based on the average closing prices of the Valeant common shares during an averaging period described in the offering documents. The offer is scheduled to expire at 5:00 PM, New York City time, on August 15, 2014, unless the offer is extended.  Valeant expects to complete a second-step merger promptly following the consummation of the exchange offer in order to acquire the remaining Allergan shares.

Allergan had previously received and rejected a revised proposal from Valeant to acquire all of the outstanding shares of Allergan for 0.83 shares of Valeant common stock and $72.00 in cash, and a CVR related to DARPin sales. Allergan announced on June 10, 2014, that its board of directors “unanimously determined that the Revised Proposal substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of Allergan and its stockholders.”

Source: Allergan and Valeant Pharmaceuticals