| NEW YORK
NEW YORK May 16 Valeant Pharmaceuticals
International Inc would consider splitting up if it
became too large from its aggressive acquisition strategy,
according to a few top 20 Allergan Inc 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
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
(Reporting by Olivia Oran in New York; Editing by Lisa