Valeant Again Sweetens Bid For Allergan

(RTTNews) - Valeant Pharmaceuticals International Inc (VRX, VRX.TO), for the second time this week, sweetened its bid for Botox-maker Allergan Inc (AGN), offering about $53 billion in cash and stock.

On Wednesday the Canadian pharmaceuticals company had raised its unsolicited bid for Allergan to about $50 billion, but the move impressed neither Allergan nor investors.

The latest sweetened offer is mainly due to a compromise reached with William Ackman, whose hedge fund Pershing Square is the largest shareholder in Allergan with a 9.7 percent stake.

Ackman, who teamed up with Valeant to bid for Allergan, has agreed to take a price cut on his own Allergan shares and this helped Valeant come up with a higher bid, yet again.

Valeant said it would now pay $72 a share and 0.83 of Valeant stock for Allergan. When compared with Wednesday's bid, the latest offer gives most Allergan shareholders an additional $13.70 a share in cash, bringing the total offer to $179.25 a share, based on Thursday's close. The stock portion of the offer is still maintained.

Allergan said it will review the latest bid. That's somewhat of a softening in stand as Allergan all along rebuffed Valeant's proposals.

Meanwhile Valeant CEO Michael Pearson said the offer provides enormous value to both the companies' shareholders. "We are very committed to getting this deal done, and are now modifying our offer with the assistance of Pershing Square to increase the economics for all Allergan shareholders."

Also Valeant retained a provision from the Wednesday offer, related to future sales of a medication to treat an eye condition. Valeant will pay Allergan shareholders up to $25 a share based on a sales target of Darpin, a medication in early stages of development. Valeant will also invest up to $400 million and retain Allergan employees to develop the drug.

As for Ackman, he is now offering to take less per share, giving up about $600 million to help Valeant fund an increased bid. Ackman said he would choose to be paid solely in stock and would receive $20.75 less per share than other Allergan shareholders.

In the original bid on April 22, Valeant, along with Ackman, offered $48.30 in cash and 0.83 shares of Valeant stock for each Allergan share, valuing the bid at about $46 billion.

Allergan has been reiterating that the offer undervalues the company and creates risks for its stockholders. Valeant, on its part, criticized Allergan for its spending ways, especially on research. Valeant has vowed to cut the combined company's R&D spending by 69 percent to $400 million a year.

Recently Allergan said Valeant's cost-cutting would threaten future sales growth and put the company at risk, and also also questioned the stability of Valeant's business model.

Allergan is best known for its Botox medicine, which is injected into muscles to smooth wrinkles. According to Valeant, a combination would result in unrivaled portfolio in Ophthalmology, Dermatology, and Aesthetics, as well as significant cost and revenue synergies.

Allergan stock closed Friday at $167.46, up $8.96 or 5.65%, on a volume of 9.7 million shares on the NYSE. In after hours, the stock gained $0.24 or 0.14%, to trade at $167.69.

Valeant stock closed Friday at $131.21, up $1.99 or 1.54%, on a volume of 10.6 million shares on the NYSE. In after hours, the stock dropped $0.09 or $0.07, at $131.12. In Toronto, the stock closed at C$142.34, up C$2.23 or 1.59%.