Friday, November 28th-4.0°C
22246
24056

Valeant takes its offer directly to shareholders of Botox maker Allergan

MONTREAL - Valeant Pharmaceuticals is taking its hostile takeover bid for Allergan directly to shareholders, sparking what could be a long battle for control of the California Botox maker.

Quebec-based Valeant formally launched an exchange offer to Allergan shareholders on Wednesday, after the Allergan board repeatedly refused to negotiate a deal.

Valeant (TSX:NYSE:VRX) has offered US$72 in cash plus 0.83 of a Valeant share for each share of Allergan (NYSE:AGN).

At Wednesday's closing trading price US$118.43 for Valeant stock in New York, that would value Allergan's shares at US$170.30, making the offer worth about US$50.6 billion.

"We believe Allergan's stockholders should have the opportunity to express their views and we are confident that Allergan's stockholders will support this combination," Valeant chairman and CEO Michael Pearson said in a statement.

Valeant's co-bidder, Bill Ackman's Pershing Square Capital Management, is also seeking to call a special meeting of Allergan's shareholders to remove six directors. Pershing owns 9.7 per cent of Allergan.

Pearson said the two efforts are part of Valeant's "clear path to complete a transaction with Allergan."

Valeant's offer expires Aug. 15, unless extended. It includes a number of conditions, including the removal of various anti-takeover obstacles Allergan's board has put in place, the tender of a majority of Allergan's shares and the termination of waiting periods. Valeant shareholders would also need to approve the issuance of shares as part of the transaction.

Valeant has said it sees no need to raise its offer again for Allergan, even though the company's refusal to negotiate has hurt its share price and reduced the value of its bid.

Pearson said Tuesday that he expects Valeant's share price will recover as it takes its offer directly to Allergan shareholders and the date of a special meeting is determined.

The formal offer for Allergan comes a day after Valeant held a conference call to once again try to dispel what is claims are misconceptions about the company.

Allergan said Wednesday it would "carefully review" the unsolicited exchange offer, but advised its stockholders to take no action at this time.

The company's board unanimously rejected the offer on June 10, saying the revised offer "substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan and is not in the best interests of Allergan and its stockholders."

Allergan has repeatedly questioned Valeant's business model, claiming it is unsustainable and based on serial acquisitions.

David Maris of BMO Capital Markets said Tuesday's conference call did "little to clear the air of concerns that many Allergan shareholders have over the Valeant business model."

Maris said Valeant's organic growth is small compared with Allergan, its debt has risen dramatically to $17.7 billion from $3.2 billion in 2010, its unadjusted results show a loss, receivables have risen faster than sales and goodwill as a percentage of total assets grew to 35 per cent in 2013 from five per cent in 2009.

"The combination of these items makes some Allergan shareholders concerned that the stock they would receive in a deal is that of a company that is showing concerning trends, not strength," Maris wrote in a report.

Maris also questioned the reasons given for the departure of the senior executive who ran Valeant's esthetics, given that the Allergan deal would result in a larger esthetics company.

He also said it's unclear that the effort to replace Allergan directors would guarantee support for the transaction if they are truly independent. "We believe that shareholders should anticipate, that this process will run well into next year," he added.

The analyst said Allergan is "significantly undervalued" with many ways to grow and boost its share price, which he says is worth more than US$200 per share as a stand-alone company and without a control premium.

Vicki Bryan of Gimme Credit said the only way for Valeant's offer to reach that value is for its stock to increase at least 35 per cent, "which hardly seems likely given our concerns about Valeant's core fundamental performance and its ability to pull off this hostile bid."

Meanwhile, she said Allergan could be pursuing a more "palatable deal" such as bidding for Irish drug manufacturer Shire, which would nearly double its revenues and put it more out of Valeant's reach.

"If Allergan and Shire actually are talking, Valeant is probably out of the game already since we believe investors will find that combination more appealing," she wrote in a report.

Allergan's shares closed up $1.88 to $162.41 in New York, while Valeant's shares were down 57 cents to C$128.53 on the Toronto Stock Exchange.

Follow @RossMarowits on Twitter

The Canadian Press


Read more Business News

24243


Recent Trending




Today's Market
S&P TSX14744.70-177.74
S&P CDNX741.87-13.53
DJIA17828.240.49
Nasdaq4791.63+4.312
S&P 5002067.56-5.27
CDN Dollar0.8756-0.0004
Gold1175.20-21.40
Oil66.15-7.54
Lumber329.40+1.40
Natural Gas4.295+0.144

 
Okanagan Companies
Pacific Safety0.145-0.005
Knighthawk0.01-0.005
QHR Technologies Inc1.27-0.07
Cantex0.04-0.005
Anavex Life Sciences0.1998+0.0288
Metalex Ventures0.06+0.02
Russel Metals29.91-0.79
Copper Mountain Mining1.94-0.18
Colorado Resources0.125-0.005
ReliaBrand Inc0.0134-0.0001
Sunrise Resources Ltd0.05+0.005
Mission Ready Services0.325+0.005

 
23744


24241

FEATURED Property
2149341330 Prestwick Lane
4 bedrooms 3 baths
$689,000
more details
image2image2image2
Click here to feature your property
Please wait... loading


Don't stop dreaming!

On Wednesday evening I drove through the Bow Valley in Alberta. It is my old home town... the first place Jackie and I moved to in 1988 when we emigrated. We ended up setting up home there and living...


Second marriage issues

It is not unusual that one or both of the parties planning to marry are approaching marriage for the second time. There are pluses and minuses to this new situation. On the plus side, individuals ente...


The last great Canadian tax shelter

A guide to how flow-through fund limited partnerships can mightily aid your tax planning!The end of the year will raise concerns among many professionals, self-employed persons, business owners and ev...

_



24185

24207


Member of BC Press Council


24018