Valeant offers a stick, a carrot and a May 12 deadline to Cephalon investors

The CEO of Canada's Valeant Pharmaceuticals has marshaled all of his arguments in favor of a hostile takeover of Cephalon ($CEPH) in a letter designed to woo shareholders, offering to bump the pharma company's $73 per share offering price "modestly" if the developer opens its books for due diligence--and the number crunchers conclude the biotech is worth the bump. And if he doesn't come out on top of this fight by May 12, Pearson adds, he's going to take his $5.7 billion and walk.

"Valeant would still prefer to conduct due diligence and negotiate a friendly transaction with Cephalon," wrote CEO J. Michael Pearson, "but the current Cephalon Board has rejected our attempts. In addition, Cephalon has structural impediments that prevent the consummation of our offer, including a "poison pill" that was put in place without stockholder approval. The Cephalon Board could eliminate these impediments, but has thus far been unwilling to do so."

Valeant offered a 29 percent premium over Cephalon's 30-day average, noting that a series of R&D setbacks had left the biotech with no new "major" products in the past 13 years. Stiff-armed by Cephalon, which has rejected the offer as far too low, Valeant has proposed a slate of dissident directors and presented investors with consent cards, saying it will walk away from the deal if it doesn't gain the support of people holding more than 50 percent of the company's shares by May 12.

Pearson has made no secret of his disdain for R&D, noting several times in recent weeks that early-stage drug research is far too risky to make solid economic sense. Instead, Valeant has grown through acquisitions, grabbing products without investing heavily in R&D.

- here's the letter from Valeant
- here's the Reuters story