Allergan Chops 1,500 Jobs to Fend Off Valeant

The company announced that it will execute a restructuring in the second half of 2014 that Allergan says will yield pretax annual savings of $475 million in 2015. Allegan will fire 1,500 employees and eliminate another 250 currently vacant positions. Allergan expects a one-time pretax charge of $375 million to $425 million spread over the course of the next four quarters.

Regarding the hostile offer from Valeant Pharmaceuticals International Inc. (NYSE: VRX), Allergan said that it has rejected all three of Valeant’s proposals because each “substantially undervalues” the company, is not in stockholders best interests and “creates significant risks and uncertainties for stockholders.” Allergan has recommended that stockholders reject the current tender offer from Valeant.

Allegan forecasts total 2014 product net sales in the range of $6.9 billion to $7.05 billion, compared with a current consensus estimate of $6.98 billion. Adjusted earnings per share are forecast at $5.74 to $5.80, compared with a current consensus estimate of $5.70.

For the third quarter, Allergan expects product sales of $1.68 billion to $1.75 billion, against a consensus estimate of $1.72 billion. Adjusted EPS is forecast in the range of $1.44 to $1.47, versus a consensus estimate of $1.45.

The company’s CEO said:

With continuing strong momentum, Allergan recorded the strongest increase in absolute dollar sales in any quarter in our history, and again delivered sales and earnings per share growth above the high end of our expectations.

Allergan’s battle with Valeant and activist investor William Ackman heated up this morning as Valeant accused Allergan of making misleading and false statements about the performance of Valeant’s Bausch & Lomb business. The ongoing battle with Valeant is surely what led to the announced restructuring. Allergan has to give investors a reason to stick with the board in beating back the Valeant offer, and an additional $475 million split among about 304 million shares is a not a bad start.

Allergan shares opened Monday at about $168.04, in a current 52-week range of $86.95 to $174.49. Thomson Reuters had a consensus analyst price target of around $187.50 before the report.

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