Valeant proposal unanimously rejected by Allergan board

Irvine, CA-Allergan’s Board of Directors has unanimously rejected an unsolicited buyout proposal by Valeant Pharmaceuticals International.

After a comprehensive review-conducted in consultation with its financial and legal advisors-Allergan’s 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 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 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.

On Monday, the board sent a letter to Michael Pearson, Valeant’s chairman and chief executive officer, informing him of their rejection.

“After careful review and consideration, our board of directors has unanimously determined that Valeant’s unsolicited proposal substantially undervalues Allergan and does not reflect the value of the company’s leading market position, sales and marketing foundation, industry-leading research and development efforts, as well as future revenue and earnings growth,” said David E.I. Pyott, Allergan’s chairman of the board of directors and chief executive officer, of the board’s decision.

“The board has determined that Valeant’s proposal creates significant risks and uncertainties for Allergan’s stockholders, and believes that the Valeant business model is not sustainable,” he said.

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