Allergan cautions against exchange as Valeant gets down to the 'facts'

Allergan CEO David Pyott

Allergan's ($AGN) board has already rejected Valeant's ($VRX) $53 billion buyout bid, prompting the wannabe-acquirer to take the proposal directly to shareholders. Unsurprisingly enough, Allergan's board doesn't like that too much, either. And if you ask Valeant, it's twisting the facts to get shareholders on its side.

Monday, the California company said it had unanimously deemed Valeant's unsolicited exchange offer "grossly inadequate," adding once again that it substantially undervalues Allergan and creates "significant" risks for its shareholders. The board cautioned investors against tendering Allergan shares to Valeant, which is trying to acquire them at a price of $72 in cash plus 0.83 shares of Valeant stock per Allergan share.

"The board strongly recommends that Allergan stockholders reject Valeant's exchange offer and prevent Valeant from taking control of Allergan at a price that does not appropriately reflect the underlying value of Allergan's assets, operations and prospects, including our industry-leading position and projected growth opportunities," CEO David Pyott said in a statement.

But Valeant says Allergan--and its investors--might feel differently if it had its facts straight. The Botox-maker's rejection of Valeant's offer is based on assumptions about its business that don't add up, a company representative told The Wall Street Journal. To dispel those assumptions, Valeant Monday released "fact-based answers to refute misleading assertions made by Allergan" in an investor presentation.

The Canadian pharma needs shareholders on its side if it wants to clear the hurdles in the way of the merger. Right now, Allergan has a poison pill defense in place, meaning Valeant can't acquire more than 10% of shares. Instead, it's hoping to spark investors into supporting its call for a special meeting, at which it hopes to overturn the board and strike the antitakeover measure.

In the meantime, some say Allergan could be weighing a follow-up bid for Ireland's Shire ($SHPG), which could neutralize Valeant's promise of a combined company's low tax rate. But it will have to move quickly if it wants to get a deal done: Reports say AbbVie ($ABBV) is readying its fourth bid for the company, and Big Pharma peers Bristol-Myers Squibb ($BMY), Merck ($MRK) and Pfizer ($PFE) could be interested, too.

- read Allergan's release
- read Valeant's release
- get more from The Wall Street Journal (sub. req.)

Special Reports: Pharma's top 10 M&A deals of 2013 - Valeant/Bausch + Lomb | The most influential people in biopharma today - J. Michael Pearson - Valeant | 20 Highest-Paid Biopharma CEOs of 2012 - David Pyott - Allergan

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