Allergan on Tuesday formally rejected a $53 billion offer from Valeant Pharmaceuticals, setting in motion the next phase of what is becoming one of the year's most protracted takeover battles.
The latest cash-and-stock offer 'substantially undervalues' Allergan and 'creates significant risks and uncertainties' for its shareholders, the chief executive, David E.I. Pyott, wrote in a letter to Valeant's chief executive, J. Michael Pearson.
Mr. Pyott also said that Valeant's latest proposal - $72 in cash and 0.83 of a Valeant share for each share of Allergan - was not even strong enough to merit deal talks.
'In addition, we do not believe your latest proposal offers sufficient or certain value to warrant discussions between Allergan and Valeant,' Mr. Pyott said in the letter.
In reaching its decision, Mr. Pyott said, Allergan's board considered what it believes to be Allergan's strong prospects as a stand-alone company, its research and development success and what it says is Valeant's 'unsustainable business model' and 'anemic growth.'
To support its arguments, Allergan released a new investor proposal illustrating what it says are its strengths and Valeant's weaknesses.
The rejection was in some ways a foregone conclusion. Allergan has refused to meet about a potential deal since William A. Ackman, the activist hedge fund manager, disclosed a stake of nearly 10 percent in the company and said he was working with Valeant on a deal.
Last week, Mr. Ackman and Mr. Pearson outlined the steps they planned to take in the coming months to replace the Allergan board and give shareholders a chance to vote on a deal.
Mr. Ackman has repeatedly said that top Allergan shareholders wanted a price of about $180 a share, which led to two price increases in three days late last month. The current offer is worth about $177 a share, based on Valeant's closing price on Monday.
Posted by Unknown on Tuesday, June 10, 2014 - Rating: 4.5
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