Pearson, Ackman appeal to shareholders after Allergan rejects Valeant's $47B offer

Valeant CEO J. Michael Pearson

Valeant ($VRX) CEO J. Michael Pearson, a serial acquirer, knows how to play the M&A game. After Allergan ($AGN) officially spurned his company's $47 billion offer earlier this week, he and partner Bill Ackman were ready with their next moves.

For starters, the Canadian company plans to sweeten its bid for the California company at a May 28 webcast "to demonstrate our commitment to getting this deal done," Pearson said in a Tuesday letter to Allergan shareholders. At that time, he'll also outline Valeant's pickup-based operating model and business strategy, of which Allergan's more traditional board has said it's wary.

"We will not stop our pursuit of this combination until we hear directly from Allergan shareholders that you prefer Allergan's 'stay the course plan' to a combination with Valeant," he wrote, noting that the Quebec-based pharma is "prepared to pay a full and fair price."

Ackman, who quietly amassed a 9.7% controlling stake in Allergan before announcing his strategic partnership with Pearson, advanced on another front Tuesday. His Pershing Square Capital Management penned its own letter to Allergan shareholders, saying it would ask for a nonbinding vote to propel Allergan into talks with Valeant.

Bill Ackman

"We believe the market has spoken, and that shareholders see substantial value in the merger proposal," it said. "We urge the board to promptly engage in good faith discussions with Valeant regarding the merger proposal."

Allergan, though, isn't buying it. "This is obviously a self-serving exercise by Pershing Square to further Valeant's attempt to acquire Allergan," the company said in a statement, calling the move "nothing more than an attempt by co-bidders Pershing Square and Valeant to transfer the value inherent in Allergan to Pershing Square and Valeant at a price that substantially undervalues Allergan."

But as Pearson and Ackman have both pointed out, Allergan's board has so far dodged the negotiating table, opting instead to swallow a poison pill and seek out other M&A moves that could help it escape its pursuer. And with Sanofi ($SNY) and Johnson & Johnson ($JNJ) recently turning down the opportunity to play white knight--and rumored target Shire ($SHPG) having already rebuffed Allergan's advances once before--the Irvine-based drugmaker could soon have its back against the wall.

"Today, Allergan is in a good position to negotiate with Valeant," Ackman warned last week. "This many not always be the case."

- read Pearson's letter
- see Pershing Square's filing
- get more from The Wall Street Journal (sub. req.)

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