Valeant, Allergan Still at Impasse In Valeant’s Takeover Bid of Allergan

J. Michael Pearson, chairman and CEO of Valeant Pharmaceuticals International and David Poyt , chairman and CEO of Allergan Inc., exchanged letters and make them public where both executives reiterated their positions regarding Valeant’s proposed takeover of Allergan. Pearson confirmed Valeant’s interest in acquiring Allergan, and Allergan again put forth its opposition. Allergan has scheduled a special meeting of its shareholders on December 18, 2014 to consider the matter

“It has been five months since Valeant proposed a combination with Allergan that would create an unrivaled platform for growth and value creation in healthcare,” said Pearson in a letter to Poyt dated September 22, 2014. “All noise aside, the arguments for combining our companies are, at this point, obvious and well-known.  Simply put, we can create and deliver extraordinary value for our both sets of our shareholders. While I recognize that takeover battles can become very heated, it is regrettable that the tone of our public back and forth has become acrimonious at times. I have not appreciated what I believe are baseless attacks on our business model, and I am sure there are things that have not sat well with you.”

“Last week, after much wrangling, you unconditionally agreed to hold a special meeting on December 18.” said Pearson. “Given that 51 of your major stockholders owning approximately 39% of your company went to great lengths to request a special meeting, we believe that stockholders are strongly supportive of the combination we have proposed and we are confident about the outcome of that meeting. We could be wrong, but we don’t think so. We are committed to this transaction.  While we would much prefer avoiding a three-month proxy contest, we will pursue it if we need to. It may be too late, but I believe we still have an opportunity to take the temperature down, and come together to see if we can begin a conversation that could lead to even more value for your stockholders while still being the right transaction for ours.”

Poyt acknowledged Pearson’s letter and issued a response on September 22, 2014. “While we acknowledge your effort as a positive engagement, we continue to conclude that Valeant’s offer is grossly inadequate and substantially undervalues Allergan, from both the outset of this matter and particularly in consideration of the enhancements Allergan recently made to its anticipated business results. Instead of creating an ‘unrivaled platform for growth and value creation in healthcare,’ as you suggest, we believe that the application of Valeant’s business model to Allergan would erode and ultimately destroy considerable stockholder value.Valeant has not allayed Allergan’s concerns in any meaningful way,” said Poyt.

“Importantly, we disagree with your statement that stockholder consent for the special meeting correlates with support for a business combination between Allergan and Valeant,” continued Poyt. “Over the past several months, Allergan has maintained an ongoing dialogue with its major stockholders. A substantial number of stockholders who consented to the special meeting have informed Allergan that they share Allergan’s perspectives on Valeant and its offer and have no intention of voting in favor of the proposal to remove Allergan’s directors. To the contrary, their consent related solely to a desire to adhere to best practices in connection with corporate governance and the stockholder franchise, which Allergan respects and appreciates.”

In response, Pearson issued a letter back to Poyt on September 24, 2014. “While we continue to believe it’s in the best interest of your shareholders for you and your team to conduct due diligence on our business, you seem intent on avoiding constructive engagement at all costs. We remain  convinced that your shareholders will support a combination of our two companies and that such a combination will create far more value than any alternative transaction or standalone plan.”

Allergan issued a statement on September 25, 2014 to re-assert its position. “Allergan’s board of directors and management team understand that the ongoing situation with Valeant and its partner, Pershing Square Capital Management, L.P is purely a discussion about who can deliver greater value to Allergan’s stockholders. We have been very clear in our belief that we can create more value than Valeant’s offer and our recent actions have been focused on achieving that goal.”

Source: Valeant Pharmaceuticals and Allergan

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