By Anna Prior
Allergan Inc. said its board has rejected the latest takeover
bid from Valeant Pharmaceuticals International Inc. and William
Ackman's Pershing Square Capital Management L.P., adding the offer
substantially undervalues the Botox maker.
Allergan said the deal creates significant risks and
uncertainties and isn't in the best interests of the company or its
stockholders.
Valeant boosted its takeover bid for Allergan late last month,
offering about $52.7 billion in cash and stock, partly thanks to
Mr. Ackman's agreement to take a price cut on his own stake.
Since Valeant's bid for Allergan was first disclosed in April,
the companies have been engaged in a public war of words. Allergan
Chief Executive David E.I. Pyott on Tuesday said Valeant's proposal
doesn't reflect Allergan's growth prospects, nor does it offer
sufficient value to warrant discussions between the companies.
In a letter to Valeant CEO 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.
The bid values Allergan at about $177.10 a share as of Monday's
close--made up of a cash component of $72 a share and 0.83 share of
Valeant--and includes the possibility of an additional $25 a share,
depending on the future revenue of Allergan's developmental
eye-treatment.
Among the risks cited by Allergan was what the company described
as Valeant's "unsustainable business model," which relies on serial
acquisitions and cost reductions, as opposed to top-line revenue
growth.
In its new investor presentation, Allergan highlighted the
volume decreases seen last year in 11 of Valeant's top 15
pharmaceutical products.
Allergan also called Valeant's synergy targets unrealistic,
saying it was confident those targets would destroy Allergan's
long-term value.
In response, a representative from Valeant said Allergan's board
continues to throw out inaccurate and misleading statements and is
recycling the same unsupported arguments about Valeant that have
already been addressed, leaving it no choice but to take the offer
directly to shareholders.
A representative from Pershing declined to comment.
Valeant has criticized Allergan's management for spending too
freely, particularly on research and development. Valeant, which
has promised that it would cut the combined company's R&D
spending by 69%, spends little on science, instead focusing on
buying established drugs and treatments and selling them through
its international network.
Earlier this month, Pershing Square filed to call a special
meeting of Allergan shareholders in an effort to unseat six of
Allergan's board members.
Write to Anna Prior at anna.prior@wsj.com
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