NEW YORK – U.S. Botox maker Allergan (IW 500/179) rejected Monday a takeover bid from Valeant Pharmaceuticals (IW 1000/959), saying it grossly undervalued the company and questioning the Canadian firm's long-term growth plan.
Allergan's board of directors unanimously turned down the unsolicited offer from Valeant, worth nearly $46 billion, highlighting its significant risks, the company said.
"After careful review and consideration, our board of directors has unanimously determined that Valeant's unsolicited proposal substantially undervalues Allergan," Allergan CEO David Pyott said in a statement.
Valeant Pharmaceuticals International, backed by activist shareholder William Ackman's Pershing Square investment group, proposed a stock-and-cash deal buyout on April 22 valuing Allergan at $45.6 billion.
The proposal "does not reflect the value of the company's leading market positions, sales and marketing foundation, industry-leading research and development efforts, as well as future revenue and earnings growth," Allergan's CEO said.
Valeant, in response to Allergan's rejection, vowed to continue its takeover campaign for the Irvine, California-based company, taking its case to Allergan stockholders.
"We are disappointed that Allergan has rejected our value-creating offer without engaging in any substantive discussions with Valeant or Allergan's largest stockholder, Pershing Square, and we remain committed to pursuing this transaction," said Valeant spokeswoman Laurie Little in an emailed statement.
In a filing with the Securities and Exchange Commission, Ackman's Pershing Square Capital Management said it was seeking a list of Allergan stockholders to contact them about its takeover proposal.
Allergan: Proposal Too Risky
Allergan, best-known for the Botox wrinkle treatment, said its board believed Valeant's proposal "creates significant risks and uncertainties for Allergan's stockholders and believes that the Valeant business model is not sustainable."
It highlighted the offer's large stock component as a risk "due to the uncertainty surrounding Valeant's long-term growth prospects and business model."
"In particular, we question how Valeant would achieve the level of cost cuts it is proposing without harming the long-term viability and growth trajectory of our business. For those reasons and others, we do not believe that the Valeant business model is sustainable."
Allergan said it expected earnings per share growth of 20% to 25% and continued double-digit sales growth.
On the eve of the takeover bid, Valeant and Ackman disclosed that they established a joint venture to make the offer, with Ackman said that Pershing Square had acquired 28.9 million shares of Allergan, or 9.7% of the company.
Valeant, headquartered in Laval, Quebec, says the acquisition will enable huge cost savings and create a leader in opthalmology, dermatology, aesthetics and other growing health fields.
Under the terms of the proposal, Valeant would buy each Allergan share for $48.30 in cash plus 0.83 shares of Valeant, saying the bid represented a "substantial" premium to Allergan's valuation.
Allergan shares fell 1.0% to $159.65 and Valeant shares dropped 0.9% to $129.98% in late-afternoon trade in New York.
Copyright Agence France-Presse, 2014