Allergan files with SEC, while Valeant unveils acquisition counter-offer

Irvine, CA-Further distancing itself from Valeant Pharmaceuticals International’s unsolicited acquisition proposal, Allergan has filed an investor presentation with the Securities and Exchange Commission (SEC) and has posted the presentation to its website detailing its initial concerns about the sustainability of Valeant’s business model.

The filing comes one week after the company announced it had received a strong outpour of support for its rejection of Valeant’s proposal from its physician customers, their nurses, and office staff members, as well as from patient advocacy groups and medical associations.

More than 500 letters of support were sent to Allergan to express gratitude following the rejection, the company had said in a prepared statement.

“Allergan is extremely grateful for the hundreds of letters of support we have received from our customers during the past few weeks,” said David E.I. Pyott, chairman of Allergan’s board and its chief executive officer. “All of us . . . are touched that our customers have taken the time to write to tell us that our work has mattered to them and their patients, and to publicly share their support and encouragement for our company’s business model and our promising future.”

Along with this week's filing, Allergan has retained two financial consultants and forensic accountants-Alvarez & Marsal and FTI Consulting-to evaluate certain concerns about the inherent value of Valeant’s pro-forma driven financial reporting.

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In a prepared statement, Allergan said its online presentation, which details the concerns surrounding Valeant’s business model, raises numerous issues about Valeant and stock value that Allergan’s stockholders should know:

·      What is Valeant’s real organic growth?

·      How have the two largest Valeant acquisitions-Bausch+Lomb and Medicis-performed under Valeant ownership? How have other acquisitions performed?

·      Does Valeant have any experience promoting products of Allergan’s scale?

·      How stable is Valeant’s management team?

·      Can Valeant cut $2.7 billion of Allergan’s expenses without disrupting the performance of the business?

·      What is the relative distribution strength of Allergan vs. Valeant in important emerging markets?

·      Is Valeant’s low tax rate sustainable?

·      Are Valeant’s accounting practices clearly consistent with others in the industry?

·      Is a business model centered on a serial acquisition and cost cutting strategy sustainable?

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But despite Allergan’s concerns, Valeant is not backing down on its acquisition quest.

During an in-person meeting for both companies’ shareholders Wednesday-which was held in response to Allergan’s assertions-Valeant announced it has:

·      Increased the cash consideration by $10 per share to $58.30, which is about a 21% increase.

·      A 0.83 Valeant share will be maintained.

·      A contingent value right for DARPin of up to $25 per share in value will be added. Additionally, Valeant commits to invest up to $400 million in DARPin and retain current Allergan employees responsible for development.

“As we publicly stated two weeks ago, today Valeant is increasing its offer for Allergan,” said J. Michael Pearson, chairman and chief executive officer of Valeant, in a letter to Allergan. “Over the past several weeks, we have met with, and listened carefully to the views of a number of Allergan shareholders.

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“Our increased offer provides additional immediate value to the Allergan shareholders, . . . we are confident (Allergan) will view this offer . . . as one that merits your immediate engagement with us,” Pearson continued. “We ask (Allergan) once again to enter into discussion with us promptly so that we can consummate this mutually beneficial transaction in a timely manner.”