Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) has announced it will not make an all-cash bid for drug maker Allergan, Inc. (NYSE:AGN), contrary to the expectations of many people.

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Earlier Allergan rejected Valeant’s offer citing the high stock component and steep cost cutting proposals.

Allergan’s rejection of Valeant offer

Last week, Allergan, Inc. formally rejected the $46 billion unsolicited takeover offer from Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX). Allergan, Inc. (NYSE:AGN), which previously rejected a Valeant takeover bid over a year ago, said the deal would create risks for Allergan’s stock holders, Valeant has undervalued Allergan and Valeant’s business model is unsustainable.

Allergan, Inc. teamed with activist hedge fund manager William Ackman of Pershing Square Capital Management, who acquired a 9.7% stake in Allergan before the deal was announced. Ackman has generated nearly $1 billion in profit on that trade thus far.  Allergan adopted a poison pill defense in an attempt to thwart the deal whereby if an unapproved investor purchases more than 10% of the shares other stockholders could then buy discounted shares, diluting the value of the aggressor’s holdings.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) on April 22 offered $48.30 in cash and 0.83 of one Valeant share for each Allergan, Inc. (NYSE:AGN) share in a $47 billion unsolicited bid made along with activist investor William Ackman.

Ackman has said Valeant’s chief executive David Pycott had a ‘disabling’ conflict of interest as a takeover would likely mean the loss of his job.

Valeant’s improved offer

In a statement issued today, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) said it will host an in-person meeting for Allergan and Valeant shareholders on May 28 to respond to assertions Allergan, Inc. (NYSE:AGN) has made that the Valeant model is not sustainable, that the Bausch + Lomb portfolio is not growing, that Valeant slashes R&D and is not committed to innovation, and that it will be impossible to capture $2.7 billion of synergies without impacting top-line growth.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) said it continues to believe that a Valeant and Allergan, Inc. (NYSE:AGN) merger will be a powerful combination for all stakeholders, including patients, physicians and health care providers, employees and shareholders.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) intends to announce an improved bid on May 28th for Allegan shareholders to consider.