Valeant raises Allergan bid to $49.44 bn: analysts say new offer still too low

Canada's biggest drug maker Valeant Pharmaceuticals International Inc yesterday raised its unsolicited offer for Allergan Inc by 21 per cent to $49.44 billion, a move designed to force the board of the Botox maker to come to the negotiating table.

California-based Allergan had early this month rejected Valeant's $45.7-billion cash and stock bid made on 22 April saying the offer substantially undervalues the company, creates significant risks and uncertainties, and is not in the best interests of the company and its shareholders. (See: Botox maker Allergan rejects Valeant's $45.7-b hostile bid)

Valeant's offer was $48.30 in cash and 0.83 in stock for each share of Allergan, totaling to $161.34.

The hostile bid immediately sparked a poison pill defence from Allergan, which adopted a one-year stockholder rights plan effective 22 April and declared a dividend distribution of one preferred share purchase right on each outstanding share.

Valeant has now offered $58.30 in cash, about $10 higher than its previous offer, and has kept the stock component of the offer at earlier level of 0.83, taking the total value of the offer to $166.16 per share as of Allergan's Tuesday closing price.

The revised bid has the backing of Bill Ackman's Pershing Square Capital Management, Allergan's biggest shareholder with 9.7 per cent stake.

However the $166.16 per share offer is still lower than the $180-$200 per share that investors and some analysts were expecting.

But the new offer also includes a contingent value right of up to $25 per share related to the potential cumulative 10-year sales of Allergan's experimental eye drug Darpin.

Valeant said that it would invest up to $400 million to help develop Darpin and retain Allergan employees to bring the drug to market.

Allergan said it will review and consider the revised offer and "pursue the course of action that the board believes is in the best interests of the company and all of its stockholders."

Allergan's anti-wrinkle and chronic migraine treatment drug Botox is the driver for the deal. Botox generated about $2 billion of Allergan's total 2013 revenue of $6.3 billion in 2013.

Founded about 60 years ago, Allergan is a global specialty pharmaceutical company whose product range includes ophthalmic pharmaceutical, dermatology and neurological products.

Apart from Botox, Allergan's dry-eye drug Restasis generated about $940 million, its breast-implant business $378 million and $100 million through Latisse, its prescription drug that increases the length of eyelashes.

Allergan, which spends about 17 per cent or about $1 billion a year of its revenue on research and development of new drugs, has 11,400 employees and manufacturing plants in Texas, Ireland, and Costa Rica.

Valeant, which has a history of aggressive deal making, is a multinational specialty pharmaceutical company that develops a broad range of pharmaceutical products, primarily in the areas of dermatology, eye health, neurology, and branded generics.

Valeant has a product portfolio of about 490 products, and has two drugs in the top 200 drugs by sales in the US. Its main markets are in the US, Canada, Mexico, Brazil, Europe and Australia.

The company, which has a market cap of C$50.6 billion and annual revenues of $5.8 billion, has made over 60 acquisitions since 2008.

A successful Allergan deal would more than double the size of Valeant and make it one of the largest specialty pharmaceutical companies in the world - in line with the company's CEO, Michael Pearson's aim of making the company into one of the five largest pharmaceutical firms by market value by the end of 2016.