Allergan Rejects Valeant Offer, Says Stock Part Risk For Shareholders

(RTTNews) - Botox maker Allergan Inc. (AGN) Monday rejected an unsolicited proposal from Canadian drug maker Valeant Pharmaceuticals International Inc. (VRX.TO, VRX).

The Board of Directors of Allergan, after a review, concluded that the proposal substantially undervalues Allergan, creates significant risks and uncertainties for its stockholders, and is not in the best interests of the company and its stockholders.

David Pyott, Allergan's CEO, in a letter to Michael Pearson, CEO of Valeant noted that Allergan has a long history of producing consistent growth and delivering solid results through an innovation, execution and discipline.

Pyott pointed out that the proposal includes a large stock component, which the board believes is a risk for Allergan stockholders due to the uncertainty surrounding Valeant's long term growth prospects and business model.

''Valeant's strategy runs counter to Allergan's customer focused approach. In particular, we question how Valeant would achieve the level of cost cuts it is proposing without harming the long term viability and growth trajectory of our business,'' Pyott asked.

It was on April 22 that Valeant said it submitted a merger proposal to acquire Allergan, which is famous for its wrinkle treatment drug Botox, for C$48.30 in cash and 0.83 shares of Valeant stock for each Allergan share. The offer values Allergan at around C$46 billion.

Allergan's Board reviewed the proposal with the assistance of its financial advisors, Goldman, Sachs & Co. and BofA Merrill Lynch, and its legal counsel, Latham & Watkins, Richards, Layton & Finger, P.A. and Wachtell, Lipton, Rosen & Katz.

David Pyott said, ''After careful review and consideration, our Board of Directors has unanimously determined that Valeant's unsolicited proposal substantially undervalues Allergan and does not reflect the value of the Company's leading market positions, sales and marketing foundation, industry-leading research and development efforts, as well as future revenue and earnings growth."

Allergan said today that, given the strength in its business, it expects to increase earnings per share by 20 to 25 percent and continue to generate double digit revenue growth in 2015.

Additionally, the company expects to produce double digit sales growth and produce earnings per share compounded annual growth of 20 percent over the next five years.

AGN closed down 1.3 percent on Friday at $161.30. VRX settled at $131.17 and VRX.TO gathered 0.6 percent to close at C$142.96.