Valeant Pharmaceuticals Inc (VRX.TO) on Monday prepared to take its $53.8 billion takeover bid for Allergan Inc (AGN.N) directly to the Botox maker's shareholders in a battle that could last late into the year.
The fight escalated when Valeant ally Pershing Square, a hedge fund that owns 9.7 percent of Allergan, called for a meeting to replace the company's board.
Pershing Square Chief Executive Officer Bill Ackman, in a conference call with Valeant CEO Mike Pearson, told investors he had requested a special meeting that could take place as early as Aug. 7. Allergan could also delay the meeting, where Pershing intends to replace a majority or more of the company's directors, to as late as November, Ackman said.
Pearson said Valeant expected in two to three weeks to file an exchange offer, a means of taking the bid to Allergan shareholders, with the U.S. Securities and Exchange Commission. He also urged Allergan to negotiate with Valeant.
"We will be patient," Pearson said. "We will get this deal done."
Allergan, whose Botox medicine is injected into muscles to smooth wrinkles, said it would consider Valeant's latest offer. Laval, Quebec-based Valeant said on Friday that it would pay $72 in cash and 0.83 share of its stock for each Allergan share, increasing its offer for the second time last week.
Valeant is also offering possible additional payments related to future sales of an experimental eye drug that Allergan owns.
In a statement, Allergan urged shareholders not to act on the bid until its board makes a recommendation.
The drawn-out process to a special meeting would benefit Valeant since an increase in its share price during that time would boost the value of its offer and make a merger more likely, said Sterne Agee analyst Shibani Malhotra.
Malhotra said he doubted Allergan would let the situation escalate to a proxy battle at the special meeting but was more likely to develop its own plan or negotiate better terms with Valeant.
BMO analyst David Maris said Allergan had options such as a share buyback, a dividend increase or combination with other companies.
Ackman said he had met last week with six major Allergan shareholders with a combined 19 percent stake, and they said they believed the merger makes sense. He said he was scrapping plans for a non-binding referendum as a means of pressuring the company to negotiate, based on shareholder feedback.
Analysts peg the value of Valeant's bid, prior to Monday's trading, at roughly $180 to $184 per Allergan share.
Shares of Allergan were up 2.6 percent at $171.80 in afternoon New York Stock Exchange trading. Valeant gained 2.2 percent to C$145.50 in Toronto and rose 1.6 percent to $133.36 in New York.
(Reporting by Rod Nickel in Winnipeg, Manitoba, and Rans Pierson in New York; Additional reporting by Euan Rocha in Toronto; Editing by Franklin Paul and Lisa Von Ahn)