Valeant Offer Weaker After Allergan Earnings

In a sharply worded press release Monday morning, Valeant said that it “can no longer tolerate” statements from Allergan that are “attempts to mislead investors and manipulate the market for Valeant stock.” Valeant said it has filed complaints with both Canadian and U.S. regulators regarding Allergan’s “false and misleading” statements.

Valeant and activist investor William Ackman have a $53 billion offer on the table for Allergan, and the hostile offer is getting more hostile all the time. Valeant and Ackman have raised their offer twice, and it now stands at $72 in cash and 0.83 Valeant shares for each Allergan share. At Friday’s closing price for Valeant, the offer is worth about $173.24 per share. Calculated based on Valeant’s share price on May 30, when the takeover offer was first announced, Valeant’s offer totals nearly $181 a share.

At issue today is a claim by Allergan that sales at Bausch & Lomb, a company Valeant acquired last year for $8.7 billion, are either stagnant or declining. Valeant hotly disputes the claim:

Contrary to Allergan’s statements this past Friday, Bausch + Lomb’s global prescription pharmaceutical business, which represents less than 20% of Bausch + Lomb total sales, grew approximately 6% in the second quarter of 2014, while the U.S. prescription pharmaceutical business grew 17%, as compared to the prior year, with well over 70% of that growth attributable to volume increases. … Valeant has owned Bausch + Lomb for 11 months and the business has performed extremely well, delivering total organic growth of 11% since the acquisition, with over 90% of that growth attributable to volume.

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What Valeant and Ackman are demanding is a special meeting of Allergan stockholders at which the suitors would propose to eliminate Allergan’s poison pill and replace six directors. Valeant and Ackman think that they can corral commitments from holders of 25% of the stock by mid-August to force Allergan to accede to their demands.

The nastiness has just started, and entertainment value aside, this is one of those deals that is probably only possible as long as it remains relatively cheap and easy to get the kind of financing necessary to make such deals possible. Ackman pointed out last week that Valeant has committed financing for its offer, “but commitments don’t last forever.”

Valeant’s stock was up about 1.5% to $123.80 shortly after the opening bell, in a 52-week range of $89.76 to $153.10.

Allergan’s stock is up about 0.3%, at $167.79 in a 52-week range of $86.95 to $174.79.

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