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Valeant takeover bid for Allergan turns hostile

Canadian firm goes directly to shareholders with offer
Valeant Pharma logo

Canada's Valeant has formally started offering its $72-per-share bid for Allergan to shareholders, bypassing negotiations with the company's board, which has repeatedly rebuffed its advances.

The tender offer - which also includes 0.83 Valeant shares for each Allergan share - is due to expire on August 15 (but may be extended) and valued the Botox manufacturer at around $53bn when it was first proposed on May 30.

Allergan's board rejected the offer last week, saying it had serious misgivings about the sustainability of Valeant's business model and 'opaque' financial accounting. Valeant has grown in meteoric fashion in recent years on the back of a series of acquisitions, but in the process has taken on around $28bn in debt. 

"We are confident that Allergan's stockholders will support this combination," said Valeant chief executive Michael Pearson.

Meanwhile, Valeant's bid partner Pershing Square Capital is continuing to call for a special meeting of Allergan stockholders to try to remove the majority of Allergan's board and do away with the company's poison pill defence, which offers stock to existing shareholders at a steep discount if any one group gains control of more than 10 per cent of its stock.

As a sweetener, the Canadian firm also said it was prepared to negotiate contingent value right (CVR) payments related to potential future sales of Allergan's well-regarded DARPin for age-related macular degeneration. A $25 per share CVR for the DARPin programme was added to Valeant's May 30 offer earlier this month.

Complicating the picture, rumours are now emerging that Allergan is on the brink of announcing a formal offer for Irish company Shire that would create a specialty pharma company with sales of $11bn a year and a market capitalisation of some $72bn.

A Reuters report suggests that merging with Shire would help Allergan fend off Valeant's unwanted overtures - appeasing shareholder who may be tempted by the Canadian company's offer - while also allowing US-based Allergan to tap into Ireland's low rate of corporation tax.

Both Allergan and Shire have stayed tight-lipped on the speculation. In a statement issued yesterday Allergan simply said it would review Valeant's latest offer and advised shareholders to take no action.

Article by
Phil Taylor

19th June 2014

From: Sales

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