In continuing its efforts to acquire Allergan Inc., Valeant Pharmaceuticals International, Inc. has commenced 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. In a statement dated June 18, 2014, Allergan said that it will evaluate Valeant’s offer. 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.

“We believe Allergan’s stockholders should have the opportunity to express their views and we are confident that Allergan’s stockholders will support this combination,” said J. Michael Pearson , chairman and chief executive officer of Valeant in a company release. “This offer, together with Pershing Square’s ongoing efforts to call a special meeting of Allergan stockholders, is part of Valeant’s clear path to complete a transaction with Allergan.”

The offer is being made on the terms and subject to the conditions set forth in the offer to exchange, dated June 18, 2014, included in the registration statement filed with the US Securities and Exchange Commission. The conditions include  removal of various anti-takeover obstacles that the Allergan board has the unilateral ability to remove, the tender of a majority of the total number of outstanding Allergan shares on a fully diluted basis, and expiration or termination of the waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other applicable antitrust laws and regulations. The exchange offer is also conditioned on the vote by Valeant shareholders to approve the issuance of Valeant common shares in the acquisition, and Valeant will file a preliminary proxy statement with respect to a special meeting of Valeant shareholders promptly.

In a press statement, Allergan acknowledged receipt of the Valeant offer. “Allergan’s board of directors, consistent with its fiduciary duties and together with its financial and legal advisors, will carefully review and evaluate the exchange offer. Allergan stockholders are advised to take no action at this time pending the review of the exchange offer by the board.: 

Allergan intends to make the board’s position on the Exchange Offer available to stockholders in a solicitation/recommendation statement on Schedule 14D-9, to be filed with the US Securities and Exchange Commission and published on Allergan’s website.

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: Valeant Pharmaceuticals and Allergan