(Adds Allergan comment)
By Rod Nickel
June 17 Valeant Pharmaceuticals Inc
said on Tuesday it will launch an exchange offer for Allergan
Inc this week, allowing it to eventually take the
unsolicited bid directly to shareholders.
Botox-maker Allergan has rejected Valeant's offer of cash
and shares, but Valeant Chief Executive Officer Mike Pearson
said he sees no reason to adjust the bid a third time. Valeant
shares have lost ground for 10 straight sessions through Monday,
reducing the value of its Allergan bid to about $50.8 billion
from $53.8 billion on May 30.
"Hostile is not our preferred approach," Pearson said. "But
this deal was so strategic and financially compelling that it
really makes sense."
Valeant's stock is "artificially depressed," Pearson said,
after weeks of criticism by Allergan and some analysts.
Shares of Valeant rose 0.2 percent at $118 on the New York
Stock Exchange in early trading. Allergan stock was up 0.5
percent at $160.12.
Valeant held a webcast to rebut Allergan's latest criticism
and clarify steps toward a hostile takeover, which could drag
Allergan's biggest shareholder, Pershing Square Capital
Management, intends to mail proxy materials as early as this
month to seek a special meeting later this year to change most
of Allergan's board, Valeant said.
At the same time, Pershing is suing Allergan to confirm its
special meeting would not trigger the company's poison pill
To trigger a special meeting, Pershing needs to gain
additional support of shareholders representing 15.3 percent of
Allergan's ownership, topping up its own 9.7 percent stake for a
total of 25 percent.
Valeant Chief Financial Officer Howard Schiller said the
company is confident enough Allergan shareholders will support
calling the meeting, noting that more than half of Allergan's
shares have traded since word of Valeant's initial offer leaked
on April 21. Hedge funds and arbitrageurs who are interested in
a deal now own a large percentage of Allergan, Schiller said.
In a statement, Allergan spokeswoman Bonnie Jacobs said;"We
are confident Allergan can create significantly more value for
stockholders than Valeant's proposal, which substantially
undervalues the company, creates significant risks and
uncertainties for Allergan's stockholders and is not in the best
interests of the company and its stockholders."
Assuming Allergan shareholders remove most of the board at
the meeting by the end of 2014, Valeant said holders of at least
10 percent of Allergan shares can then apply to court for
another meeting to elect replacement directors, a process that
could take another two months.
The new Allergan board could then negotiate a deal with
Valeant and close its exchange offer.
The battle of words and presentation slides between the two
companies has ranged from Valeant's acquisition-focused business
model and accounting methods to Allergan's research and
development costs. On Monday, the saga took a surprising twist
when Allergan released private email comments it received from
Morgan Stanley. The investment bank, which was pitching to
advise Allergan before Valeant hired it, was quoted by Allergan
calling Valeant a "house of cards."
Pearson said Allergan's move was "just a little bit of
noise" and Morgan Stanley continues to advise Valeant.
(Reporting by Rod Nickel in Winnipeg, Manitoba; additional
reporting by Caroline Humer in New York; Editing by Jeffrey
Benkoe and Sofina Mirza-Reid)