* Cephalon rejects Valeant offer as too low
* Valeant nominates seven people to Cephalon board
* Valeant says Cephalon fails to negotiate
(Adds Valeant response)
By Jessica Hall and S. John Tilak
NEW YORK/TORONTO, April 5 Cephalon Inc CEPH.O
on Tuesday rejected an unsolicited, $5.7 billion acquisition
bid by Canada's Valeant Pharmaceuticals (VRX.TO)(VRX.N), and
Valeant sought to replace the U.S. biopharmaceutical company's
board of directors.
Cephalon said Valeant's $73-a-share bid, which Valeant
expects to finance entirely with debt, undervalued the company,
as well as "its key assets and its prospects."
"From the standpoint of the Cephalon shareholder, a
transaction with Valeant at this time and at the price you
proposed would mean forgoing the greater value obtainable from
Cephalon's strategic plan, including the value inherent in our
diversified and robust portfolio of marketed and pipeline
products," Cephalon said in a letter to Valeant.
The letter was disclosed in a press release.
Valeant has said its offer represented a 24 percent premium
over Cephalon's closing share price of $58.75 before news of
the deal became public, and about a 29 percent premium over the
U.S. drugmaker's 30-day trading average. [ID:nN29299668]
Cephalon's stock has traded above the offer price, closing
on Tuesday at $77.35.
Noting disappointment over the Cephalon rejection of its
bid, Valeant said it has received positive feedback from many
of the largest Cephalon stockholders.
Some of Cephalon's biggest shareholders happen to be the
largest shareholders in Valeant as well. They include T. Rowe
Price (TROW.O) and Fidelity.
Some analysts said Valeant's bid did not take into account
"Valeant offered to pay $73 per share or $5.7 billion in
cash with essentially no value for Cephalon's pipeline. The
deal appears to be opportunistic in taking advantage of
Cephalon's weak stock price," Buckingham Research Group analyst
David Buck said in a research report.
Valeant, meanwhile, fulfilled its promise to move quickly
to try to replace Cephalon's board.
In a filing with the U.S. Securities and Exchange
Commission, Valeant said it was seeking to replace the board
because "we believe that the company board is not acting, and
will not act, in your best interests."
Valeant said Cephalon has "declined to engage in meaningful
discussions with us in a timely manner. We believe that the
company's stockholders -- the owners of the company -- are
entitled to make a decision on whether or not the company
should be sold," the SEC filing said.
Valeant has been moving swiftly and is looking for a quick
outcome, whether or not it gets Cephalon. It has said it could
raise the bid if it is allowed to look at Cephalon's books and
sees additional value. [ID:nN30126551]
In Cephalon, Valeant would gain a company with strong cash
flow, a growing cancer drug in Treanda and several other
products, a branded generics business that would fit in with
its own, and a promising pipeline of drugs in development.
Valeant Chief Executive Michael Pearson has said he is
prepared to walk away from the bid within a month if the
Cephalon shareholders can't be persuaded. [ID:nN01110253]
Valeant's nominees for Cephalon's board are Santo Costa,
Richard Koppes, Lawrence Kugelman, Anders Lonner, John
McArthur, Thomas Plaskett and Blair Sheppard.
Cephalon set a record date of April 8 by when shareholders
must own Cephalon stock to be eligible to vote on Valeant's
"Unless a knight in shining armor comes and puts in a bid
that's much higher than Valeant is willing to go, I can see
Valeant trying to force this deal through by trying to change
the board and change the vote," Stifel Nicolaus analyst Annabel
"I don't see a situation where Valeant is going to
significantly bid against itself. There's no other bidder here,
for now," Samimy said. "Cephalon is in a rough spot if they're
going to be able to change the board."
Valeant, formed when Canada's Biovail bought U.S.-based
Valeant in September for $3.3 billion and took its name, may
bring some baggage to the table.
Valeant predecessor Biovail has a checkered history that
the Cephalon board may take into consideration. It recently
reached a settlement with U.S. securities regulators over
allegations that Biovail had committed accounting fraud.
The Securities and Exchange Commission had accused Biovail
and four current and former officers of overstating earnings
and hiding losses to meet earnings forecasts.
In 2007, Biovail paid $138 million to settle a shareholder
lawsuit accusing it of making false statements to inflate its
(Reporting by S. John Tilak and Jessica Hall; editing by Rob
Wilson, Bernard Orr, Gary Hill)