Allergan Inc., the maker of Botox stated that it has rejected the takeover bid proposed by Valeant Pharmaceuticals International Inc.
The Irvine drug maker last month received a buyout offer that was unsolicited from Valeant Pharmaceuticals and Bill Ackman, the activist shareholder. For defending, Allergan tried to adopt the strategy of a poison pill for slowing down this potential takeover and then reportedly tried to pursue other buyers too.
The takeover was for $46 billion from the Canadian rival, which sets stage for a long and nasty fight for controlling the Irvine Company with its eye and skin medication collection. Valeant’s offer was a combination of its stocks and cash. As per the offer, stockholders of Allergan would be receiving $48.30 as cash and 0.83 share of Valeant stock when exchanged for a share. The shareholders of Allergan would then own about 43 percent of this newly combined company, if the offer is accepted.
Until Monday, Allergan didn’t say much about this offer. Allergan’s chief executive, through a letter by David E.I. Pyott, told Valeant that the offer was too low and that this deal has undervalued its worth and also posed high risks and uncertainties to its stockholders. David Pyott revealed in a statement that this offer does not reflect the company’s value as per the leading position of the company in the market. Pyott also told Michael Pearson, Valeant’s Chief Executive about the Canadian Company’s uncertain growth prospects and its business model as a risk to the stockholders. Allergan’s board has unanimously rejected its offer.
There was no response from either Valeant or Ackman to requests for comments for some time. An analyst, Shibani Malhotra working with Sterne Agee mentioned that Valeant is not likely to walk away as they got into it with their proposal to complete it. The main question here is that it is all boiling down to fair assessment of the price.
The strategy of Valeant is just opposed to the customer-focused approach of Allergan, stated Pyott. He wrote that the question is how Valeant will plan to achieve the cost-cutting, which it is proposing without causing any harm to its long-term viability, development and growth.
The co-founder of Allergan, Gavin Herbet stated earlier this month that he was a little worried about Valeant slashing the budget for research and development of the company by almost 80% and this would rigorously hamper the ability of Allergan to produce latest and new drugs. It’d also result in the elimination of a number of jobs too.