Valeant Lifts Cash Offer For Allergan By 21%

(RTTNews) - Canadian drug maker Valeant Pharmaceuticals International Inc. (VRX.TO, VRX) Wednesday said it sweetened its cash offer for Botox maker Allergan Inc. (AGN) by 21 percent, following feedback from discussions, while it maintained stock portion in the offer.

The company also offered a new Contingent Value Right or CVR related to protein drug DARPin sales which would provide up to approximately $25 per share of additional value based on the about $20 billion in potential cumulative 10-year DARPin sales.

Valeant now would pay $58.30 per Allergan share in cash, a growth of $10 per share from its previous offer. Meanwhile, the company continues to offer 0.83 Valeant share per Allergan share.

According to Valeant, its increased offer provides additional immediate value to the Allergan shareholders. The cash portion of the revised offer alone represents approximately 50 percent of Allergan's unaffected share price, and provides Allergan shareholders with significant substantial additional value if DARPin achieves Allergan's expectations.

It was on April 22 that Valeant, along with William Ackman's Pershing Square Capital Management, made a hostile bid for Allergan for $48.30 in cash and 0.83 Shares of Valeant stock for each Allergan share, valuing the latter at about $46 billion. Pershing Square is Allergan's largest shareholder with about 9.7 percent stake.

On May 13, Valeant had said that it plans to improve its previously announced offer as it remains resolute in consummating a merger with Allergan.

Allergan, which spurned the initial hostile bid from Valeant noting that the proposal was undervalued and creates risks for its stockholders, on Tuesday had cast serious doubts on Valent's business model, and said a merger between the two companies doesn't make any business sense.

In its latest letter to Allergan Chairman & CEO David Pyott, Valeant Chairman & Chief Executive Officer Michael Pearson said, "We strongly believe that applying Valeant's operating philosophy, strategy, and financial discipline to a broader set of durable assets will create substantial long-term returns for Allergan shareholders over the short, intermediate, and long term, and exceed returns available to Allergan shareholders through alternative options, including a standalone alternative."

Valeant now said the Allergan shareholders will continue to be able to elect their mix of cash and shares, subject to proration, as well as receiving the CVR.

In addition, Valeant said it is prepared to fund up to $400 million to develop DARPin and will pay 40 percent of the net sales of DARPin after recovery of shareholders' investment in DARPin development expenses. The company would propose to retain Allergan employees responsible for development of the drug, and will select five independent scientific and business leaders, from the list of eight given by Allergan, to oversee DARPin development.

Earlier in the day, Valeant announced its agreement to sell its skin care rights to Swiss foods giant Nestle SA (NSRGY.PK, NSTR.L) for $1.4 billion cash. The sale includes rights of Restylane, Perlane, Emervel, Sculptra, and Dysport owned or held by Valeant. Valeant said it believes the sale is very attractive, and fits well with its announced plans for a transaction with Allergan. The deal is not contingent upon a successful transaction with Allergan.

Valeant closed Tuesday's regular trading at $129.95, down $3.51 or 2.63 percent.

Allergan stock lost 1.14 percent on Tuesday, and settled at $165.02. In pre-market activity, the stock is gaining 0.59 percent, and trading at $166.