Allergan Rejects Valeant's Latest Takeover Bid -- 3rd Update

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 [e-mail]

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