Valeant CEO Says Company is Willing to Increase Offer to Acquire Allergan

J. Michael Pearson, chairman and chief executive officer of the specialty pharmaceutical company, Valeant Pharmaceuticals International, has sent a letter to the board of directors of the specialty pharmaceutical company, Allergan Inc., to say that Valeant would be willing to raise its offer to acquire Allergan to at least $200 per share. The statement follows ongoing efforts by Valeant to acquire Allergan, which Allergan has rejected. In June 2014, Valeant made an unsolicited approximate $53-billion bid to acquire Allergan following rejection by Allergan of earlier acquisition proposals by Valeant. Valeant had offered $72 in cash and 0.83 Valeant common shares for each share of Allergan stock.

“To be clear, Valeant is prepared to improve its offer and provide value to your shareholders of at least $200 a share,” Pearson said in the letter. “We are confident that an increase in our stock price, and in consideration, will provide that value. No other potential acquirer of Allergan has the operational and tax synergies that we have, and no other potential acquirer of Allergan can provide the value that we can.” A $200-a-share price would value Allergan at approximately $59 billion.

In response, Allergan issued the following statement: “If Valeant were to make an increased offer, the board would carefully consider it and respond in due course. However, to date, as we have noted repeatedly, Valeant’s offers have been grossly inadequate and significantly undervalued Allergan.”

In his letter, Pearson further said that the stock price of Allergan has risen to higher levels due to Valeant’s offer and interest in acquiring Allergan, and that Valeant’s offer still “represents a very substantial premium” even with what he described as an undervaluation of Valeant stock. He said that based on shareholder input and other financial assessment, Valeant stock should be trading for at least $150 per share. In commenting of Allergan’s stock performance, Pearson said: “Allergan’s shares were trading at $110 at the beginning of the year, and $117 before we made our offer. The market and peer group are flat this year. Given this, it is unimaginable that Allergan would be trading anywhere near where it is now without our offer, even with the cost cuts you belatedly put in place in direct response to us.”

Pearson also questioned Allergan shareholder support. “Since we made our offer, many of your long-only shareholders, including your largest shareholder other than Pershing Square, have sold down or out,” Pearson said in his letter. “A number of your remaining large long-only shareholders publicly expressed their concerns regarding actions you had been contemplating, and we understand that a number have privately expressed those concerns as well. Both ISS and Glass Lewis have been highly critical of the board.” 

In response, Allergan said in its letter: “Valeant’s letter does not indicate an increased exchange offer price nor does it disclose the mix of consideration; instead, Valeant goes to great lengths to defend its own stock price and to disparage Allergan, including making what we believe to be disparaging remarks about Allergan and its stock price.”

Allergan further commented: “The Allergan board has taken a number of actions over the past six months that have delivered tangible value to our stockholders and will continue to do so in the future. Wall Street analysts have recognized these actions and significantly raised the floor for a standalone Allergan. Allergan believes that any assertion that Allergan’s stock would be trading near its first quarter trading price absent the Valeant offer is not substantiated by fact. We also note that a number of long Allergan stockholders that have decreased their Allergan positions have told Allergan that they did so as they do not want to own Valeant stock.”

Allergan had previously scheduled a special shareholder meeting on December 18, 2014 to vote on a proposal to consider replacing members of its board of directors. The push to call a meeting was led by Pershing Square Capital Management, which built a stake in Allergan, and which is seeking to have the Valeant bid be taken.

Source: Allergan and Valeant

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