Valeant announces merger proposal for Allergan

Proposal calls for each share of Allergan stock to be exchanged for $48.30 in cash and 0.83 shares of Valeant stock; Allergan launches stockholder rights plan in response

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LAVAL, Quebec—Valeant Pharmaceuticals International, Inc. has submitted a merger proposal to Allergan, Inc.’s board of directors to acquire the Irvine, Calif.-based biopharmaceutical company. Under the proposal, each share of Allergan stock would be exchanged for $48.30 in cash and 0.83 shares of Valeant common stock, based on the fully diluted number of outstanding shares of Allergan stock, and shareholders would be able to choose a combination of cash and shares, subject to proration. Allergan shareholders will own 43 percent of the combined company.
As of April 11, Pershing Square Capital Management L.P. crossed the 5 percent Schedule 13D ownership level and began a rapid accumulation program. Pershing Square holds a 9.7-percent stake in Allergan and is the company’s largest shareholder, and has agreed to elect only stock consideration in the transaction.
“The combination of Valeant and Allergan represents the most strategic and value-creating transaction I have ever analyzed. I strongly urge the Allergan board of directors to carefully examine the proposed transaction and enter into negotiations with Valeant so that a merger can be consummated promptly.  We will be electing all-stock consideration in the transaction so that we can remain a long-term holder of the combined company,” William A. Ackman, CEO of Pershing Square, said in a press release.
Valeant and Pershing Square expect a number of benefits should this acquisition go through, including high single-digit organic growth for the foreseeable future, more than $2.7 billion in annual operating cost synergies, 25 to 30 percent pro forma 2014 cash EPS accretion and a leading portfolio in ophthalmology, dermatology and aesthetics.
“This proposal represents an undeniable opportunity to create extraordinary value for both Allergan and Valeant shareholders by establishing an unrivaled platform with leading positions in ophthalmology, dermatology, aesthetics, dental and the emerging markets” J. Michael Pearson, chairman and CEO of Valeant, commented in a statement. “Together, we can capitalize on the inherent strengths and complementary portfolios of our two companies, while achieving significant synergies by applying Valeant’s unique operating model to a combined set of assets. While the Allergan CEO and board of directors made it clear, both privately and publicly, that they were unwilling to enter discussions with us about creating a value-enhancing combination, we are hopeful that our proposal for this extremely compelling combination will enable us to engage in productive discussions.”
Allergan noted in a press release that its board of directors, “in consultation with its financial and legal advisors, will carefully review and consider the Proposal and pursue the course of action that it believes is in the best interests of the Company’s stockholders. The Company’s stockholders do not need to take any action at this time.” Allergan has brought on Goldman, Sachs & Co. and BofA Merrill Lynch as its financial advisors, with Latham & Watkins serving as its legal counsel.
In response to Valeant’s proposal, Allergan also announced that its board of directors unanimously adopted a one-year stockholder rights plan effective April 22. The company noted that “The Plan is not intended to prevent an acquisition of the Company on terms that the Board considers favorable to, and in the best interests of, all stockholders. Rather, the Plan aims to provide the Board with adequate time to fully assess any proposal.”

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