Valeant Ready to Raise Offer for Botox Maker Allergan
A vial of Botox, made by Allergan.
Valeant Pharmaceuticals said on Monday that it was willing to raise its offer for Allergan, and once again invited the Botox maker to negotiate a friendly deal.
But Valeant stopped short of announcing a new mix of cash and stock, instead saying it was "prepared to improve its offer and provide value to your shareholders of at least $200 a share." That would mark a roughly 20 percent increase from Valeant’s current offer, but is also contingent on Valeant’s stock price rising.
The overture, made in a letter from Valeant’s chief executive, J. Michael Pearson, to the Allergan board, was released as Allergan reported strong third quarter earnings.
At Allergan, total product net sales increased more than 17 percent in the quarter to $1.7 billion, and earnings per share improved according to Allergan’s preferred accounting methods.
In the letter from Valeant, Mr. Pearson argues that Allergan’s stock is trading at artificially high levels because of the ongoing takeover attempt by Valeant and its partner in the effort, the hedge fund Pershing Square Capital Management.
And Mr. Perason’s says that Valeant’s own stock is artificially depressed for the same reason. Mr. Pearson notes that Allergan’s own adviser, Goldman Sachs, endorsed Valeant’s stock earlier this year.
Because of Valeant’s depressed share price, the company declined to propose a new mix of cash and stock. But a person briefed on the process said Valeant and Pershing Square would be willing to offer additional cash, and more stock, as part of a revised offer.
The letter marks a change in tone from Mr. Pearson. Until now, he has let Pershing Square’s chief executive, William A. Ackman, lob most of the attacks at Allergan’s board.
But the Valeant chief executive on Monday communicated his frustration with Allergan’s continued refusals to engage in deal talks.
"One month ago I extended an olive branch, which was summarily rejected the same day," Mr. Pearson wrote. "You have refused all of our offers to meet and answer any questions you may have about Valeant or about our offer. Instead, you have allowed management to continue making baseless attacks."
But there are few signs that Allergan’s board is going to have a change of heart anytime soon. Instead, Valeant and Pershing Square have to hope that Allergan shareholders replace a majority of the board at a special meeting, scheduled for Dec. 18, if Allergan doesn’t strike another deal to complicate matters before then.
With that in mind, Valeant’s letter appeared intended for Allergan’s shareholders as much as for the board.
"To be clear, Valeant is prepared to improve its offer and provide value to your shareholders of at least $200 a share," Mr. Pearson wrote. "We are confident that an increase in our stock price, and in consideration, will provide that value. No other potential acquirer of Allergan has the operational and tax synergies that we have, and no other potential acquirer of Allergan can provide the value that we can."