| NEW YORK
NEW YORK Valeant Pharmaceuticals International Inc (VRX.TO) would consider splitting up if it became too large from its aggressive acquisition strategy, according to a few top 20 Allergan Inc (AGN.N) shareholders who were briefed by Valeant management.
Canada's Valeant, which alongside Pershing Square's Bill Ackman is pursuing an unsolicited $47 billion takeover of U.S. drug maker Allergan, told the shareholders that down the line it could break up into smaller discrete businesses that would then pursue roll up strategies of their own.
Some analysts have said that an acquisition of Allergan would make Valeant so large that it would become difficult to find meaningful takeover targets that would allow Valeant to continue to grow.
Valeant, which makes a number of products including over-the-counter drugs and medical devices, has a market value of $42 billion, compared to $47 billion for Allergan, which makes products in the aesthetics field like Botox.
Valeant's business model, which relies heavily on buying companies to grow revenues rather than through research and development, has been criticized by Allergan Chief Executive Officer David Pyott as "not sustainable."
Valeant said in a letter to Allergan shareholders that it would respond to concerns regarding its operating model during a May 28 webcast.
"Traditionalists have questioned our operating model since we began our journey more than six years ago," the letter said.
Valeant CEO Mike Pearson has said he wants Valeant to become a top five drugmaker by 2016. The company has spent $19 billion on 35 acquisitions since 2008 including its $8.7 billion purchase of eyecare company Bausch & Lomb last year, which is its biggest completed deal to date.
Valeant's market cap has grown from $1 billion in 2008 to more than $40 billion as a result of the company's dealmaking.
The shareholders declined to be named because they are not authorized to speak to the media. Valeant and Allergan declined to comment.
Valeant said it would improve its current bid for Allergan, which was rejected earlier this week. The sweetened offer could come during the May webcast. Over the last several weeks, the two sides have been speaking to top shareholders.
Following Valeant's offer last month, Allergan put in a so-called "poison pill" to prevent Ackman from increasing his nearly 10 percent stake in Allergan.
Valeant said at that time it planned to cut costs at Allergan by about $2.7 billion, including in research and development.
(Reporting by Olivia Oran in New York; Editing by Lisa Shumaker)