After two sweeteners and an uncharacteristic commitment to R&D, Allergan ($AGN) suitors Valeant Pharmaceuticals ($VRX) and activist investor Bill Ackman are taking their fight to shareholders, turning hostile their quest to buy the drugmaker for nearly $54 billion.
In a Monday SEC filing, Ackman's Pershing Square Capital Management requested a special meeting of Allergan shareholders, seeking to remove 6 board members and force the company to negotiate with Valeant, something Pershing said it has yet to do.
Under Valeant and Pershing's latest offer, each shareholder would get $72 and 0.83 shares of Valeant per Allergan share, a deal valuing the company at about $54 billion. In addition, provided Allergan partakes in "prompt good faith negotiation," Valeant is willing to earmark up to $400 million for Allergan's Darpin, an in-development treatment for macular degeneration, and the company wants to add a contingent value right that would pay shareholders up to $25 a share more if the drug reaches its full potential.Allergan CEO David Pyott
Pershing, which owns about 9.7% of Allergan, believes it can convene a special meeting as soon as Aug. 7, according to Reuters, and Valeant CEO J. Michael Pearson has said his company plans to file an exchange offer--formally taking its bid to Allergan shareholders--in the next two or three weeks.
Allergan, while agreeing to review the latest offer, has been steadfastly on-message: Accepting the buyout would pigeonhole the company into Valeant's restrictive business model, crippling R&D and hamstringing growth. In a presentation to investors last week, Allergan hired a forensic accounting firm to poke holes in Valeant's claims of organic sales growth, questioned its management of high-dollar acquisitions Bausch & Lomb and Medicis, and essentially refuted the company's whole approach to making money in the drug development business.
For its part, Valeant's pitch to shareholders relies on some basic math: Since the company made its first approach on April 10, Allergan's shares have soared nearly 46%, Pershing pointed out in its filing.
"We believe the market has spoken, and that shareholders see substantial value in Valeant's revised proposal," the company wrote.
In response to Pershing's request, Allergan is asking its shareholders to take no action until the board has completed its review of the latest bid and issued a recommendation, which it will do "in due course," the company said in a statement.