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Valeant steps up pressure on Allergan with raised bid

Ups price yet again in attempt to acquire company behind Botox

Valeant Pharma logoValeant has raised its offer price for Allergan for the second time in less than a week, despite earlier suggestions it would not do so unless Allergan's board entered into formal negotiations.

The latest increase raises the cash component of the deal to $72 per share, with the stock element retained at 0.83 Valeant shares, while Allergan shareholders also get the promise of up to $25 more if the company's much-touted DARPin ophthalmic candidates meet their potential.

The change of heart by Valeant chief executive Michael Pearson seems to have come about due to pressure from investor Bill Ackman, whose Pershing Square Capital Management company is backing the deal.

Under the revised terms, Pershing will forego any cash and take its entire share in the combined company in stock, while also accepting $20.75 less per share than other Allergan shareholders, equivalent to around $600m of value.

"We believe that our gesture to the other Allergan owners makes an extraordinarily strong statement about our belief in the long-term value of this highly strategic business combination," said Ackman.

Allergan seems determined to remain independent, but said its board would meet to review the revised offer. However, it reiterated that it believes there remain "important issues regarding the sustainability of Valeant's business model and stock value" and advises shareholders to take no action for the time being.

The new offer values Allergan at more than $53bn, or around 46 per cent of what Pfizer was offering for AstraZeneca (AZ). To take the comparison a little further, Allergan's product sales were a little over $6bn last year, compared to almost $26bn for AZ.

The Botox manufacturer is concerned that Valeant's explosive growth in recent years, fuelled by a string of acquisitions and funded by taking on a lot of debt, means it could be heading for a fall. If that proves to be the case, it would affect the value of the stock component within Valeant's offer.

Valeant opened its bidding at $48.30 per share plus stock, raising that to $58.30 per share just last week. The latest offer is contingent on Allergan entering into "good faith negotiations," and Pearson has not ruled out a hostile bid for the company.

Allergan's share price rose almost 6 per cent on news of the latest offer to reach $167.46.

Article by
Phil Taylor

2nd June 2014

From: Research, Sales



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