(Adds Allergan CEO comments, Valeant reaction)
By Caroline Humer and Ransdell Pierson
June 10 The battle for botox maker Allergan Inc
heated up on Tuesday as the company officially rejected
a sweetened $53 billion takeover offer from Valeant
Pharmaceuticals International and activist investor
Since Canadian drugmaker Valeant and Pershing Square Capital
Management made a joint bid for the company on April 22,
Allergan has stood firm against entreaties to sit down at the
table and negotiate a deal.
Ackman, who has almost a 10 percent stake in Allergan, and
Valeant raised their joint offer on May 28 and when investors
were displeased and sold shares, added even more cash to it on
May 30. He also said that he would call shareholders to a vote.
On Tuesday, Allergan once again declined the bid, saying
that the offer undervalues the company and is too risky for
shareholders. Allergan also reissued criticisms of Valeant's
business model, saying that its reporting of financial
information was opaque.
"We do not believe your latest proposal offers sufficient or
certain value to warrant discussions between Allergan and
Valeant," Allergan Chief Executive Officer David Pyott said in a
letter to Valeant CEO Michael Pearson.
A Valeant spokeswoman said that given Allergan's rejection,
the company would move forward with its plan to take the deal to
shareholders for a vote. The first step in that battle would be
to elect a Valeant-Ackman backed board of directors at Allergan.
A shareholder meeting to do that could be held in November.
"Valeant's offer to combine with Allergan will create
substantial value for both companies' shareholders, and we look
forward to giving Allergan shareholders the opportunity to speak
for themselves," Valeant spokeswoman Laurie Little said in a
Pyott said in an interview with Reuters that he was in for a
"I'm an endurance player; I climbed Kilimanjaro last year,"
Pyott said. He said shareholders wanted the company to use the
$14 billion in cash flow it would generate over the next five
years for acquisitions.
Allergan can pursue other options, BMO Capital Markets
analyst David Maris said.
"We continue to believe that Allergan has many options,
including a buyback, dividend, combination with others - or even
some combination of these," Maris said in a research note.
The offer, which includes $72 in cash plus 0.83 Valeant
shares, is currently worth about $177 per share, or $53 billion.
The deal value is calculated based on 303.5 million diluted
shares outstanding as of March 31, 2014 and Ackman's holding of
Ackman was not immediately available for comment.
Allergan shares were down 0.6 percent at $163.17 and Valeant
shares fell 1.8 percent to $124.41 by around 1:30 p.m. (1730
Allergan shares are far off the $177 per share price
implicit in the Valeant offer.
"It suggests that the market is still not going to go for it
at the current price," Morningstar Research analyst Michael
(Reporting by Caroline Humer and Ransdell Pierson in New York
and Rod Nickel in Winnipeg, Canada; Editing by Chizu Nomiyama
and Marguerita Choy)