Valeant CEO responds to Allergan’s merger rejection

Laval, Quebec-On the heels of the unanimous rejection by Allergan’s Board of Directors of an unsolicited buyout proposal by Valeant Pharmaceuticals International, Valeant’s top executive intends to issue a financial increase counteroffer in an attempt to salvage the deal.

In a letter sent to Allergan shareholders Wednesday, J. Michael Pearson, Valeant chairman and chief executive officer, said the company’s offer was “rejected without Allergan having had any discussions with Valeant . . . (and that) Allergan offered a business-as-usual strategy while attempting to discredit our company.”

Allergan’s board had rejected Valeant’s $47 billion proposal after a comprehensive review-conducted in consultation with its financial and legal advisors earlier this month. The board concluded that the proposal “substantially undervalues Allergan, creates significant risks and uncertainties for its stockholders, and is not in the best interest for Allergan and its stockholders,” the company had said in a prepared statement.

Last week, Gavin S. Herbert, Allergan’s co-founder and former chairman, urged the company’s directors to reject the buyout offer-which consisted of $48.30/share in cash and 0.83 Valeant shares/Allergan share in stock-at its annual shareholder meeting in Irvine.

According to the Los Angeles Times, Herbert told the board that he was afraid the buyout would cut Allergan’s research and development budget by nearly 80%, which would hinder its ability to produce new drugs and expand its business.

“That would really kill this company,” Herbert had explained to the board. “I am very much against this.”

Herbert had also questioned Valeant’s fiscal health, stressing that the company would be burdened by heavy debt if it acquired Allergan.

In an attempt to expand the proposal’s discussion, Pearson wrote in his letter that Valeant has scheduled a webcast for May 28 to explain why it feels its offer is superior to Allergan’s “go-at-it-alone” strategy.

To demonstrate its commitment to the deal, Pearson also wrote that Valeant plans to increase its offer for Allergan, although he did not offer details.

Valeant will pay a “full and fair price, but consistent with our track record, we will remain financially disciplined,” Pearson explained.

Pearson concluded by stressing that his company will not stop at its pursuit of merging with Allergan until it hears directly from the company’s shareholders that they would rather “stay the course.”