By David Benoit and Jonathan D. Rockoff
A sizable investor in Allergan Inc. doesn't favor the offer
Valeant Pharmaceuticals International Inc. has made for the Botox
maker, in conjunction with activist William Ackman.
Dan Davidowitz, the chief investment officer of Polen Capital
Management LLC, said Thursday in an interview: "We think we could
get this type of price just from another couple of years of
compound earnings growth. So I don't think this is that attractive
of an offer."
With about 0.9% of Allergan shares, Polen is a top 20
shareholder, according to FactSet. It has held the stock for about
five years and counts it as its biggest position. Like all
shareholders, he would benefit from an improved offer.
On Tuesday, Valeant unveiled a nearly $46 billion offer that
valued Allergan shares at about $152.89 a share as of Monday's
closing prices. Allergan had earlier resisted Valeant's private
overtures.
Now, Valeant is on a campaign, with Mr. Ackman, to persuade
Allergan shareholders to back its cash and stock bid. Analysts,
investors and deal makers say a key question will be Allergan
shareholders' appetite for Valeant shares. Valeant's stock has been
a winner under its chief executive, Michael Pearson, who took over
in 2008. But the strategies of the two drug makers are very
different. Valeant shuns research and development and grows through
product sales and acquisitions, while Allergan spends heavily on
science.
In a research report in February, following a meeting with
Allergan management, Sanford C. Bernstein & Co. analysts said
shareholders would "hesitate" to take Valeant stock in a deal
because they have "very different business models."
David Maris, a BMO Capital Markets analyst, said his
conversations with many of the top 20 Allergan shareholders since
news of the Valeant offer reveal concerns about taking on Valeant
stock.
"There's a concern the currency -- Valeant stock -- is not worth
dollar for dollar what they're getting. They'd rather have cash,"
Mr. Maris said.
Many leading Allergan shareholders are worried the Allergan
business "will be worth less in a few years than it is now" because
of Valeant's plans to cut spending on research and development and
any changes it might make to marketing efforts.
Mr. Pearson said on Tuesday he expected stock of a combined
company would cross $200 a share, and touted his company's ability
to cut costs and grow a combined Allergan and Valeant. Mr. Ackman,
whose firm now owns about 9.7% of Allergan, said he viewed his
investment ultimately as a stake in Valeant. He called the campaign
his first-ever pharmaceutical investment. "We think Valeant stock
is cheap now," Mr. Ackman said.
Write to David Benoit at david.benoit@wsj.com and Jonathan D.
Rockoff at jonathan.rockoff@wsj.com
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