Allergan Rejects Valeant's Latest Takeover Bid -- 4th Update

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 [e-mail]

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