Allergan Rejects Valeant Pharma's Revised $53 Bln Takeover Bid

(RTTNews) - Botox maker Allergan Inc. (AGN) said Tuesday that its board of directors has unanimously rejected a sweetened $53 billion takeover bid from Canadian drug maker Valeant Pharmaceuticals Inc. (VRX, VRX.TO) and billionaire investor William Ackman's hedge fund Pershing Square Capital Management, L.P.

Allergan noted that the revised unsolicited proposal substantially undervalued the company as well as created significant risks and uncertainties for its shareholders.

David Pyott, chairman and chief executive officer of Allergan said, "The investment community has recognized the revised long-term growth outlook Allergan provided on May 12, 2014 and appropriately raised valuations for a standalone Allergan. We do not believe Valeant's proposal reflects Allergan's growth prospects, nor does it offer sufficient or certain value to warrant discussions between Allergan and Valeant."

In a letter to Michael Pearson, chairman and CEO of Valeant Pharma, Pyott said that the Allergan board has serious concerns about the large stock component of Valeant's proposal, and that recent presentations by both Valeant and Pershing Square did nothing to address the issues previously raised by Allergan.

"The Allergan Board must seriously consider the many questions around the sustainability of Valeant's business model as they directly impact the total future consideration for our stockholders," Pyott said in the letter.

In late May, Valeant Pharma sweetened its takeover bid for Allergan for the second time in a week, currently offering about $53 billion in cash and stock. Under the latest offer, Allergan shareholders will get $72 per share in cash and 0.83 of Valeant stock.

Earlier, Valeant had raised its unsolicited bid for Allergan to about $50 billion, but that move had impressed neither Allergan nor investors.

The latest sweetened offer was mainly due to a compromise reached with Ackman, whose hedge fund Pershing Square is the largest shareholder in Allergan with a 9.7 percent stake.

Ackman, who teamed up with Valeant to bid for Allergan, agreed to take a price cut on his own Allergan shares and this helped Valeant come up with a higher bid once again.

However, last Monday, Pershing Square called for a special meeting of Allergan shareholders as it seeks to remove six members from the current Board of Allergan. Ackman is seeking support from shareholders to oust six directors from the board and smoothen the process to consummate the merger.

Allergan is best known for its Botox medicine, which is injected into muscles to smooth wrinkles. According to Valeant, a combination would result in unrivaled portfolio in ophthalmology, dermatology, and aesthetics, as well as generate significant cost and revenue synergies.

AGN is currently trading at $164.83, up $0.68 or 0.41 percent on a volume of 286,329 shares.