Last week was a rollercoaster ride for the Laval-based pharmaceutical company Valeant. The company is trying to take-over Botox and Darpin-maker Allergan. Allergan’s current managers are fighting hard to prevent the deal.
Valeant got bad news on Wednesday, when Allergan notified the stock market that it has discussions about a merger with a third company, Dublin-based Actavis. The notification increased Allergan’s stock price to more than $197. Valeant responded with a claim that it would be willing to increase its offer to $200 a share under a fair sales process, such as an auction. The offer would be significantly higher than its initial bid of less than $60.
Good news came on Thursday, when a U.S. judge refused Allergan’s request to ban Valeant and its partner Pershing, which owns 10% of Allergan’s stock, from voting together at a special shareholder’s meeting on December 18. Pershing hopes to oust most of Allergan’s current board members at this meeting, something that would make a merger with Valeant more likely.
On Friday, Valeant decided to reach out directly to plastic surgeons and dermatologists who use Botox and/or Darpin. A hundred doctors were surveyed in July, and 44 of them cited concerns about potential cost-cutting, reduced research and development and the loss of customer service under a Valeant take-over.
The letter said in part:
Our philosophy on integration has been developed through our positive experience with Bausch + Lomb. Following our acquisition a year ago in August, we made an effort to maintain relationships and invest in customer activities – we made no U.S. sales force cuts whatsoever. We were collaborative on all major issues and gave B+L’s business leaders the autonomy to make their own integration decisions. Importantly, we made sure their leaders understood and enjoyed Valeant’s unique and highly effective culture. These efforts have allowed us to maintain strong customer relationships, garner widespread employee satisfaction and continue accelerating organic growth across the business.
Note: This story appeared on page 15 of the Laval issue of the Suburban yesterday.
June 1, 2014: Valeant trying hostile take-over of Allergan
Laval-based pharmaceutical company Valeant lobbed a second volley in its hostile takeover attempt of Botox and Darpin-maker Allergan last Wednesday.
The dermatology and eye health specialist upped the cash portion of its offer to Allergan shareholders to $58.10 in cash plus 83 cents worth of Valeant shares for each dollar worth of Allergan shares. They also sold five anti-aging skin care products to Nestle for $1.4 million to prepare for the purchase.
The California-based company fought back with a pithy press release confirming the offer headed with the title:
Allergan advises stockholders to take no action at this time.”
The same release highlighted a financial and forensic analysis of Valeant by Alvarez & Marsaland FTI Consulting released one day earlier. In part, it read:
As part of this review, Allergan filed an investor presentation with the Securities and Exchange Commission on May 27, 2014 detailing the analysis of publicly-available data on Valeant and, among other things, the opaque nature of Valeant’s pro-forma driven financial reporting. The presentation addresses a number of important issues regarding the sustainability of Valeant’s business model and stock value that Allergan believes are highly relevant considerations for Allergan’s stockholders.”
At an investor presentation in New York that same day, Valeant CEO Michael Pearson described the companies’ success at acquiring firms and making them more profitable. In the past year, the company has purchased PreCision Dermatology, Inc., Solta Medical and Bausch + Lomb. Pearson said that all the companies have grown since being integrated into Valeant.
Valleant’s attempts to merge with Allergan have been going on for more than a year now, but Allergan’s directors have refused to meet with those from Valeant. That led to the first hostile offer in late April and a deal with William (Bill) Ackman, the CEO of Pershing Square Capital Management and the owner of 9.7% of Allergan stock.
On May 19, Ackman tried to convince shareholders to ignore their own directors’ advice. He wrote to Allergan key director Michael Gallagher praising the deal. His letter was filed with the Securities and Exchange Commission. In part, it reads:
It is evident based on the market’s response to the Valeant proposal that it is substantially superior to Allergan’s value as a standalone company. The Valeant offer represents a significant premium to Allergan’s unaffected stock price of $116.63 on April 10th, the day before Pershing Square began its rapid accumulation program. Conservatively valued at Valeant’s current stock price, the offer represents a 38% premium to Allergan’s unaffected stock price.”
Ackman’s backing will enable Valeant to ask U.S. regulators to allow them to hold a referendum of Allergan shareholders this month or next.
Later note: This story appeared on page 3 of the Laval edition of the Suburban on June 4.
