The board of directors of the specialty pharmaceutical company Allergan Inc. has unanimously rejected the approximate $45.7-billion unsolicited bid by Valeant Pharmaceuticals International, Inc. to acquire Allergan. Valeant had made the bid on April 22, 2014 under  which each Allergan share would be exchanged for $48.30 in cash and 0.83 shares of Valeant common stock, based on the fully diluted number of Allergan shares outstanding. Under the proposal, shareholders would be able to elect a mix of cash and shares, subject to proration. Allergan shareholders would own 43% of the combined company. Pershing Square, Allergan’s largest shareholder would hold  a 9.7% stake, which it said at the time of the bid would agree to elect only stock consideration in the transaction with the intent to remain a long-term shareholder of the combined company.

 “After careful review and consideration, our Board of Directors has unanimously determined that Valeant’s unsolicited proposal substantially undervalues Allergan and 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,” said David E.I. Pyott, Allergan’s chairman of the board and chief executive officer (CEO), in a statement. “Allergan has a long history of producing consistent growth and delivering solid results through a combination of innovation, execution, and discipline. We are confident in our ability to extend our track record, enthusiastic about the opportunities before us, and believe Allergan is well positioned to deliver compelling value to our stockholders. Furthermore, the Board has determined that Valeant’s proposal creates significant risks and uncertainties for Allergan’s stockholders and believes that the Valeant business model is not sustainable.”

In a letter to Valeant Pharmaceuticals Chairman and CEO Michael Pearson, Pyott outlined the risks to a possible combination of the companies. “In addition to substantially undervaluing our company, your proposal includes a large stock component, which we believe is a risk for Allergan stockholders due to the uncertainty surrounding Valeant’s long-term growth prospects and business model. Valeant’s strategy runs counter to Allergan’s customer-focused approach. 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 also announced that it expects to increase earnings per share by 20% to 25% and to continue to generate double-digit revenue growth in 2015. Additionally, the company expects to produce double-digit sales growth and produce earnings per share compounded annual growth of 20% over the next five years. “The company believes this is achievable as a consequence of strong business momentum driven by a wide array of recent approvals and anticipated near term approvals, as well as an expectation that it is in a position to produce meaningful additional leverage and scale across both the S,G&A [Selling, General & Administrative] and R&D categories without negatively impacting its commitment to deliver the highest quality outcomes to customers and their patients,” said Allergan in the company statement.

Source: Allergan