Allergan, Inc. (AGN) announced that it has once again rejected the acquisition offer from Valeant Pharmaceuticals International, Inc.(VRX).
Valeant has been relentlessly pursuing Allergan since Apr 2014. On Jun 18, 2014, Valeant announced that it has commenced an exchange offer for the common stock of Allergan, Inc. after the latter rejected its offer a couple of times.
As per the terms of the offer, shareholders of Allergan could exchange each of their shares for $72.00 in cash and 0.83 shares of Valeant common stock. Allergan shareholders can also opt for cash and a number of Valeant shares, subject to proration.
The Chase So Far
Valeant had proposed in Apr 2014 that each Allergan share would be exchanged for $48.30 in cash and 0.83 shares of Valeant's common stock. Thereafter, the company upped its offer by 21% wherein the cash consideration of the offer was increased by $10.00 per share to $58.30. On May 30, 2014, Valeant proposed a revised offer to Allergan whereby each Allergan share would be exchanged for $72.00 in cash and 0.83 shares of Valeant common stock. Valeant offered a contingent value right of up to $25.00 per share for Allergan's ophthalmology pipeline candidate, DARPin. The candidate is currently in phase II.
This was the second time that Valeant had upped its offer. We note that Allergan's largest shareholder, Pershing Square Capital Management, L.P, with a 9.7% stake in the company, had agreed to elect only stock consideration in the transaction and exchange their Allergan shares for Valeant shares at a 1.22659 exchange ratio (based on the closing share price on May 29).
However, Allergen, after consultation with its independent financial and legal advisors, concluded that Valeant’s unsolicited exchange offer to acquire all of its outstanding common shares was grossly inadequate and substantially undervalued the company’s industry-leading position, financial performance, strong balance sheet, exceptional management and growth prospects.
Allergan also cited that the exchange offer creates significant risks and uncertainties for the stockholders of Allergan and is not in the best interests of the company and its shareholders.
Allergan continues to be uncertain about Valeant’s acquisition-based revenue growth model and believes that the latter’s anemic organic growth is driven by unsustainable price increases.
Our Take
Allergan carries a Zacks Rank #1 (Strong Buy) while Valeant has a Rank #3 (Hold). Valeant has been quite active on the acquisition front over the last couple of years. Valeant is a specialty pharmaceutical company, primarily focusing on dermatology, neurology and ophthalmology, among others. The company acquired Bausch+Lomb in 2013.
Allergan has been reluctant about Valeant’s offer right from the start. It remains to be seen how far Valeant takes this hostile bid.
Investors can also consider stocks like AbbVie (ABBV) and Bayer (BAYRY). Both carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment