Allergan's ($AGN) pulled back the veil on the restructuring it's hoping will lure shareholders away from Valeant's ($VRX) $53 billion hostile buyout bid. Among the blueprints: laying off 1,500 employees, or 13% of its global workforce--and leaving room for some potential acquisitions.
Those cuts--in addition to 250 vacant positions the company will shed--will help propel the company toward $475 million in 2015 pre-tax savings, Allergan said Monday. The company also announced second-quarter earnings of $1.40 per share--up from the $1.22 EPS it posted in last year's Q2--and hiked earnings guidance for this year and next.
The numbers, along with Allergan's latest cost-cutting plans, could force Valeant to up its buyout bid--if not fend off the hostile takeover altogether. "Today's announcement by Allergan makes it more difficult for Valeant to demonstrate how a merger can add incremental value and Allergan shareholders may now require Valeant to pay a greater premium for Allergan, we believe," Sterne Agee analyst Shibani Malhotra wrote in a note to clients.
Allergan's job-cutting ax won't fall on any "customer-facing personnel"--instead, the company hinted that it would be R&D jobs on the chopping block. But Allergan hastened to say that the R&D cuts wouldn't affect its hopes for new launches. "Any reductions in discovery programs will not impact approvals within the strategic plan period," it said in a release. Other savings will come from spending reductions across commercial operations, general and administrative functions, and manufacturing.
Don't rule out a buyout, either, the company says. Its rumored target Shire ($SHPG) may have been snatched up by AbbVie ($ABBV) last week, but Allergan says it has "additional strategic options" available, including acquisitions.
All of this--as well as the $0.05 per share second-quarter dividend Allergan announced with its earnings Monday--is part of its management's efforts to give shareholders "most of what they want" in lieu of a Valeant merger, CEO David Pyott has said. Quebec-based Valeant is rounding up support for a special shareholder meeting, at which it hopes to oust most of Allergan's current directors and replace them with a new, deal-happy slate.
But it seems at least one Allergan investor may have been unimpressed with the company's planned moves. A top Allergan shareholder, mutual fund Capital Research and Management Co., recently sold almost all of its Allergan holdings after meeting with Pyott, The Wall Street Journal reports.
Meanwhile, the two sides are still spitting fire at each another. Monday, Valeant got in touch with regulators in both the U.S. and Canada, citing Allergan's "apparent attempt to mislead investors and manipulate the market" with false statements concerning Valeant's last buy, the eyecare giant Bausch + Lomb.
|Valeant CEO J. Michael Pearson|
"We do not believe that it is productive for either company to conduct due diligence in a public forum and although we have consistently offered Allergan the opportunity to conduct due diligence on our business, its management and board have refused, and have instead chosen to make misrepresentations ... about our business," Valeant chief J. Michael Pearson said in a statement.
But Allergan shrugged the criticism off, standing by its prior comments. "At the end of the day, investors will make their own decisions," it said.
- read Allergan's earnings release
- read Valeant's release
- see the WSJ story (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