Valeant Hints at Higher Allergan Bid -- 2nd Update

By Michael Calia 

Valeant Pharmaceuticals International Inc. hinted at the prospect of a higher takeover offer for Botox maker Allergan Inc., which raised its guidance for the year on Monday, as both companies angle for shareholder support ahead of a key deadline.

Both companies hope to encourage hedge funds and other so-called event-driven investors to buy more Allergan stock before Thursday, the date when shareholder ownership counts for determining who votes at a December board election.

Valeant and partner Pershing Square Capital Management want to oust a majority of Allergan's board then to pave the way for merger talks that Allergan has rebuffed for more than six months.

Allergan has deemed Valeant's bid, worth about $53 billion in cash and stock, as too low and has repeatedly criticized Valeant's business model.

Valeant said Monday that it is prepared to raise its offer yet again to value Allergan at least $200 a share while urging the company to negotiate.

Valeant has argued its own shares are trading at low levels and suggested an increase in its share price would help support a higher bid.

"Allergan would not be trading anywhere near where it is absent our offer, and our offer, even at Valeant's current stock price, represents a very substantial premium," Valeant Chief Executive J. Michael Pearson wrote in a letter to Allergan, noting Allergan's shares were trading at $117 before Valeant's approach.

A representative from Allergan wasn't immediately available to comment on the prospect of a higher bid.

The Wall Street Journal had previously reported Valeant and Pershing were preparing to increase their bid by $15 a share, valuing the company at about $191 a share, or more than $56 billion overall.

In Monday's letter, Valeant pointed to its own better-than-expected results this month, which it said demonstrated the "true strength" of the business while raising its outlook for the year.

Allergan, too, has issued positive long-term guidance. On Monday, the company again raised its earnings outlook for the year, this time to $6.27 to $6.30 a share, after raising it to $6.20 to $6.25 a share earlier this month.

For the current quarter, Allergan said it expects earnings of $1.80 to $1.83 a share. Analysts had been projecting $1.74 a share.

Overall, for the most recent period, Allergan posted a profit of $312.5 million, or $1.03 a share, up from $299.8 million, or $1 a share, a year earlier. Excluding items, Allergan posted earnings of $1.78 a share, up from $1.23 a year earlier.

Earlier this month, Allergan had projected $1.76 to $1.78 a share in earnings for the period. It had initially projected $1.44 to $1.47 a share.

Revenue rose 17% to $1.82 billion, above the $1.78 billion projected by analysts surveyed by Thomson Reuters.

Net product sales rose 17% to $1.79 billion. Specialty-pharmaceutical sales improved 14% to $1.52 billion. Botox sales rose 15% to $560.1 million.

Write to Michael Calia at [e-mail]

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