By David Benoit
Allergan Inc. on Tuesday rejected a sweetened $53 billion bid
from Valeant Pharmaceuticals International Inc. and William Ackman
and said it still wouldn't enter into negotiations.
The Irvine, Calif. maker of Botox said Valeant's cash and stock
offer significantly undervalues its prospects for growth. It again
called Valeant's business model "unstainable" and said Allergan
shareholders don't want Valeant stock.
"They are really quite considerable concerns," Allergan Chief
Executive David Pyott said in an interview. "The only part we do
know how to value is the U.S. dollar portion of" the bid.
The rejection is the latest volley in a heated fight for
Allergan. Mr. Ackman has already taken steps to seek a majority of
the board, and Valeant is readying a hostile tender offer.
Tuesday, Valeant said it had "no choice but to take our offer
directly to shareholders."
Since late April, Allergan has rebuffed Valeant and Mr. Ackman's
approaches, saying it would be better off on its own and painting
the suitor as a risky acquisition machine its shareholders would do
well to avoid.
Valeant, in turn, has argued that Allergan spends too much on
research and development of drugs and said a combination of the two
dermatology-heavy pharmaceutical companies would allow Valeant to
cut costs and boost sales. Valeant generally buys companies with
proven treatments in markets it finds attractive and avoids or cuts
drug development costs.
Two weeks ago, Valeant boosted its bid for Allergan twice in a
matter of days, with the latest offer coming in at about $52.7
billion in cash and stock, or $179.25 a share. Valeant had also
added the possibility of up to an additional $25 a share, depending
on the future revenue of Allergan's developmental
eye-treatment.
The second increase came with an assist from Mr. Ackman's
Pershing Square Capital Management LP, which agreed to take a
lesser price for its Allergan shares to help fund a higher bid.
Mr. Ackman said top Allergan shareholders told him they would
back a deal worth $180 a share. Last week, he launched a call for a
special meeting of Allergan shareholders where he would seek to
remove a majority of the board. Mr. Ackman's Pershing Square owns
9.7% of Allergan's stock and has complained about Allergan's
refusal to negotiate with Valeant.
Allergan's Mr. Pyott said his conversations with shareholders
have assured him they want more value. He cited Wall Street
analysts who believe Allergan shares should trade around $179 alone
as evidence to him the offer is too low and doesn't reflect a
takeover premium.
In a letter to Valeant Chief Executive Michael Pearson, Mr.
Pyott reiterated the board's "serious concerns" about the large
stock component of the proposal and said that the recent
presentations by both Valeant and Pershing Square did nothing to
address the issues that Allergan raised.
Allergan also called Valeant's synergy targets unrealistic,
saying it was confident those targets would destroy Allergan's
long-term value.
For its part, Valeant has criticized Allergan's management as
spending too freely, particularly on research and development.
Allergan shares were down around 0.6% in midday trading at
$163.17. Valeant shares also fell, about 1.8% to $124.32.
Anna Prior contributed to this article.
Write to David Benoit at david.benoit@wsj.com
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