Valeant's Allergan bid gets hostile as Ackman makes a play for board control

Valeant Pharmaceuticals ($VRX) CEO J. Michael Pearson and the company's largest shareholder, Bill Ackman, have been trying to propel Allergan's ($AGN) board toward deal negotiations ever since their first unsolicited bid back in April. Now, they've decided they've waited long enough.

Just a few days after sweetening its original $47-billion-dollar bid for the second time, the duo said it's going hostile, with Ackman's Pershing Square Capital Management--Allergan's largest shareholder with 9.7%--calling for a meeting to replace a majority or more of the company's directors, Reuters reports.

"We believe the market has spoken, and that shareholders see substantial value in Valeant's revised proposal," Pershing said a filing with the Securities and Exchange Commission, adding, "to date, the board has refused to engage with Valeant in any way regarding a merger with Valeant."

The move follows a Friday offer that upped Valeant's terms from $49.4 billion to about $52.7 billion. The latest bid comprised $72 cash and 0.83 shares of Valeant stock per Allergan share, with shareholders able to elect cash and/or stock.

All shareholders except Pershing Square, that is. As Ackman said in a statement Friday, he called Pearson with an offer to forgo the cash and accept Valeant shares instead. Ackman's move--worth $600 million in value, he said--allowed Valeant to raise its cash offer to Allergan's other investors.

Bill Ackman

"We believe that our gesture to the other Allergan owners makes an extraordinarily strong statement about our belief in the long-term value of this highly strategic business combination," he said. "We look forward to the Allergan board immediately entering into negotiations with Valeant and finalizing this transaction."

It wasn't Ackman's first attempt to bring about discussions between the two companies. In mid-May, Pershing Square penned a letter to Allergan shareholders, saying it would ask for a nonbinding vote to nudge Allergan toward the bargaining table--a course of action Ackman has now dropped, Reuters says.

But the Botox-maker's leaders have so far shown no sign that they're interested. Instead, Allergan swallowed a poison pill to prevent Ackman from building his stake and has openly criticized Valeant's M&A-dependent business model. Reports have listed Valeant's disinterest in R&D funding as a major turnoff for the specialty drugmaker.

Valeant CEO J. Michael Pearson

Takeover artist Pearson, however, remains unfazed. "We strongly believe that applying Valeant's operating philosophy, strategy, and financial discipline to a broader set of durable assets will continue to create substantial returns for shareholders over the short, intermediate, and long term," he said in a statement. "We are very committed to getting this deal done."

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