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| Pershing Square Capital Management's Bill Ackman |
In the midst of a hostile bid for Allergan ($AGN), activist investor Bill Ackman said shareholders are willing to hand over the company for $180 per share, just about in line with the latest offer from Valeant Pharmaceuticals ($VRX) and Ackman's Pershing Square Capital Management.
In an interview with CNBC, Ackman said he sat down with Allergan's "largest shareholders" after the company rejected Valeant and Pershing's initial offer and got a clear message: "'Look, Bill, if you can get us $180 a share, we're going to sign on to this transaction, because we believe it makes sense,'" Ackman related. "'Make it easy for us. Get us the price.'"
And so he did. Pershing owns about 9.7% of Allergan, and, to increase the cash consideration offered to other shareholders, Ackman's company agreed to waive its cash payout and take Valeant stock instead.
That cleared the way for the latest offer, under which each shareholder would get $72 and 0.83 shares of Valeant per Allergan share. As of Friday's closing price, the deal is worth $177.44 per share and values Allergan at more than $53 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.
To get the deal done, Ackman and Valeant are working to remove 6 Allergan board members in a special meeting of shareholders, an effort to force the company to negotiate.
For its part, Allergan has been steadfast in its refusal, saying the buyout would clip the company's growth by forcing it into Valeant's restrictive business model, hampering R&D and destroying shareholder value. In a presentation to investors last month, 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.
But Ackman said shareholders are on his side, adding that Pershing's move to forgo cash in the proposed deal speaks louder than any debate over R&D spending.
"I think it's unprecedented," he told CNBC. "I think it certainly sends a message that for all the talk about accounting gimmickery and attacks on the business model of Valeant--which, by the way, are completely self-interested attacks by Allergan management--we've said we're prepared to take 100% stock in the combined company if the deal happens. There's no greater endorsement."
- watch the interview