Allergan, Inc. (NYSE:AGN) announced in a press release this morning that its board has unanimously rejected Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s latest offer. The board said the offer still undervalues the company while also creating big risks and new uncertainties for Allergan shareholders.
The revised offer from Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was for a combination of $72 in cash per common share of Allergan plus .83 Valeant common shares per Allergan, Inc. (NYSE:AGN) share. The deal also included a contingent value right in connection with DARPin sales.
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Why Allergan told Valeant no
Among the reasons Allergan, Inc. (NYSE:AGN) cited for saying no to Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was Allergan’s accelerating sales growth and “strong, long-term organic growth.” The company also stated that its research and development department has a track record of a more than 25% sales return on cumulative R&D spending and that the drug maker is projecting double-digit growth in sales and earnings per share, plus 20% compounded annual growth over the next five years.
“The Board is confident that the Company will create significantly more value for stockholders than Valeant’s proposal,” said Allergan, Inc. (NYSE:AGN) Chairman and CEO David Pyott in a statement. “We look forward to updating stockholders on or around the time of our second quarter earnings announcement.”
Allergan explains shareholder risks
Allergan, Inc. (NYSE:AGN) also described the risks and uncertainties it sees for shareholders, calling Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s business model “unsustainable” and stating that it relies on “serial acquisitions and cost reductions” rather than top-line revenue growth. In addition, the drug maker said there’s not enough clarity around Valeant’s growth potential and called the company’s growth “anemic.” Allergan said it believes the reason Valeant hasn’t been growing is because it has frequently been raising its prices significantly.
And finally, Allergan, Inc. (NYSE:AG) said Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has set forth “unrealistic” selling, general, and administrative and research and development synergy targets. The company said it believes these targets would “destroy” its long-term value.
Other concerns include the repeated complaint that Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s offer is too heavily weighted toward stock and not enough toward cash.
Allergan files investor presentation
Along with the press release issued today, Allergan, Inc. (NYSE:AGN) filed a new investor presentation with the Securities and Exchange Commission. The drug maker also posted that presentation on its website. In the presentation, Allergan said it has spoken with many shareholders who expressed concerns about whether Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s business model is sustainable.
The company also examined two of Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s more recent acquisitions. It said the data suggests that most of Bausch & Lomb’s growth came from price increases, which it believes are not sustainable. The other company it looked at was Medicis, which the presentation states saw “rapid erosion…” “within a short time” after Valeant acquired it.
We’ve included the full presentation below. It shows all the data in extensive charts and graphs.