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Allergan rebuffs Valeant once again

Could lead to hostile takeover bid
Valeant Pharma logo

Allergan is holding steadfast in its defence against a takeover attempt by Valeant Pharmaceuticals, roundly rejecting the Canadian company's latest $72-per-share bid.

Botox-maker Allergan issued a statement yesterday saying it has unanimously rejected the third offer by Valeant and Pershing Square Capital - which values it at more than $53bn - saying once again that it undervalues the company and creates "significant risks".

The offer does not "reflect the company's financial strength, future revenue and earnings growth or industry-leading R&D," according to chief executive David Pyott.

Allergan reiterated its earlier claims that Valeant's business model - predicated on "serial acquisitions and cost reductions" - is unsustainable and has resulted in "anaemic growth" for acquired products which it alleges comes mainly from price increases. The takeover would create a company with an eye-watering $28bn in debt.

It is also questioned the value of the Valeant stock included in the bid; Allergan shareholders will receive 0.83 of Valeant shares alongside the $72 in cash, plus potential future payments based on the sales performance of Allergan's much-touted DARPin drug candidates.

Allergan has once again declined to enter into negotiations with Valeant, raising the possibility that its Canadian suitor will mount a hostile takeover attempt.

Pershing has already amassed a 9.7 per cent stake in Allergan and has been trying to persuade other shareholders to replace six of Allergan's nine directors, but faces obstacles to grabbing a larger slice. Meanwhile, Allergan recent implemented a poison pill defence that offers stock to existing shareholders at a steep discount if any one group gains control of more than 10 per cent of its stock.

Valeant reiterated its view that Allergan does not understand its strategy and is making inaccurate and misleading statements about its strategy. With a hostile takeover bid now on the cards analysts have predicted that Allergan will trim back its costs and may introduce a share buyback plan to shore up its defences.

Article by
Phil Taylor

11th June 2014

From: Research, Sales

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