Allergan, best-known for Botox, has unanimously rejected Valeant and partner Pershing Square’s sweetened unsolicited $53.8 billion offer.
Last week saw Valeant take the unusual step of upping its bid to buy Allergan for the second time in a few days. The offer was upped after Pershing, the hedge fund controlled by Bill Ackman which is Allergan's biggest shareholder with a 9.7% stake, agreed to take only stock in Valeant for its Allergan shares.
Pressure has been piled on the Allergan board since Valeant’s first approach in April, and the latest offer again includes a contingent value right sweetener relating to future sales of the experimental eye drug DARPin. However Allergan is standing firm, saying the revised proposal “substantially undervalues the company [and] creates significant risks and uncertainties for the stockholders”.
In a letter to Michael Pearson (his counterpart at Valeant), Allergan chief executive David Pyott lists the virtues of the company as a standalone business, including its generation of “strong, long-term organic growth fuelled by innovation and sales and marketing excellence” and its “extensive R&D engine”.
'Unsustainable business model'
He once again referred to Valeant's “unsustainable business model [which] relies on serial acquisitions and cost reductions, as opposed to top-line revenue growth and operational excellence”. Mr Pyott also spoke of “a lack of clarity surrounding Valeant's growth potential” because of its “opaque pro-forma driven financial reporting, which provides, among other things, limited insight into how past acquisitions and products are performing”.
The Allergan boss also referred to Valeant's “anaemic growth”, which he believes is primarily driven by significant price increases and its “unrealistic SG&A and R&D synergy targets, which…would destroy Allergan's long-term value”.
Valeant, which earlier this week got US Food and Drug Administration approval for Jublia (efinaconazole) for the treatment of onychomycosis of the toenails, still feels it can push a deal through and is expected to go directly to shareholders and push for a change to Allergan’s board.