Valeant, Allergan Duel In Letters

Valeant Allergan
via David Benoit of WSJ

Along with an update on how the third quarter is going, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) released a series of letters regarding its attempts to take over Botox maker Allergan, Inc. (NYSE:AGN) today. The Wall Street Journal published the letters in full.

Valeant extends an “olive branch” to Allergan

Valeant Chairman and CEO Michael Pearson expressed regrets for the “acrimonious” public back and forth they’ve had with Allergan and again asked the company to come to the bargaining table. He also said he hasn’t “appreciated” what he says are “baseless attacks” on Valeant’s business model and admitted that there are probably things “that have not sat well” with Allergan management either.

Pearson also pointed out that 51 of Allergan, Inc. (NYSE:AGN)’s major shareholders, who own a total of 39% of the company’s shares, pushed for a special meeting and said he thinks that it means there is widespread support for a combination with Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX).

He added that they would like to avoid a proxy battle but that they were enter one if they must. In addition, he offered to sit down and meet with the Botox maker’s management to go over Valeant’s business model in detail.

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Allergan thinks Valeant will destroy shareholder value

In response, Allergan CEO David Pyott wrote back to defend their attacks on Valeant’s business model. He disagreed with Pearson’s comment that a merger between the two companies would create “an unrivaled platform for growth and value creation in healthcare.” Instead, he said applying Valeant’s business model to Allergan “would erode and ultimately destroy considerable stockholder value.”

Pyott said they also disagree with Valeant’s assertion that shareholders’ push for the special meeting means they support a combination. The Allergan, Inc. (NYSE:AGN) CEO said that a “substantial number” of shareholders who agreed to hold the special meeting in December have sided with them against Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)’s business model and its offer, which they still believe undervalues the company.


Valeant updates third quarter numbers

Allergan has continued to raise doubts about Valeant’s financial position, and in Pearson’s response, he provided an update on how their third quarter is going right now. He said they expect to beat consensus estimates for revenue and guidance for cash earnings per share, organic growth, restructuring charges, and adjusted cash flow from operations.

The Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) executive said they’re expecting a greater-than 15% same store organic growth date across most of their businesses. They also expect to see gains in market share in most of their businesses. The drug maker will release its third quarter earnings report on Oct. 20.

He also urged Allergan, Inc. (NYSE:AGN) management to conduct due diligence on Valeant and said they “seem intent on avoiding constructive engagement at all costs.”

Valeant – Allergan fight gets more complex

The letters between Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) and Allergan are essentially just more of the same arguments we’ve been hearing from both sides. But the bloody brawl may only get worse as Allergan, Inc. (NYSE:AGN)’s special meeting date approaches.

Dave Benoit of The Wall Street Journal pointed out today that the battle between the two pharmaceutical companies now involves four companies worth $40 billion, one activist (Bill Ackman) and six reported offers. He tweeted a diagram to put it all into perspective.