Allergan, Inc. (AGN) issued a statement to its shareholders in response to Valeant Pharmaceuticals International, Inc.’s (VRX) letter earlier this week. Allergan has been trying to convince its shareholders that the unsolicited Valeant offer is not in the best interest of the company and its stakeholders.
We note that Valeant sent a letter to Allergan, published by the former earlier in the week, providing an update on its expected third-quarter results. Valeant also mentioned that it would like to negotiate a mutually agreeable transaction with Allergan (read more: Valeant (VRX) Sends Letter to Allergan, Provides Q3 Update).
Allergan making a case for itself mentioned in its press release that it has demonstrated strong growth in its business since early 2013 on the back of double-digit sales growth and several global regulatory approvals. The company also strengthened its argument by stating that it delivered outstanding sales growth in the second quarter of 2014.
Allergan has also raised its guidance for 2014. Allergan now expects 2014 earnings per share of $5.74 to $5.80 as compared to the prior guidance of $5.64 to $5.73. The company expects product net sales in a band of $6,900 million to $7,050 million in 2014 (previous guidance: $6,775 million to $7,000 million).
Moreover, Allergan reiterated that it is implementing a restructuring initiative, over and above its prior strategic plan, which is expected to reduce cost by approximately $475 million annually. This will help the company to deliver double-digit sales growth and adjusted earnings per share growth of more than 20% in the next five years.
We note that Valeant has been relentlessly pursuing Allergan since Apr 2014. In Jun 2014, Allergan rejected Valeant’s latest offer of exchanging each of Allergan’s shares for $72.00 in cash and 0.83 shares of Valeant common stock. Allergan shareholders under the offer could also opt for cash and a number of Valeant shares, subject to proration (read more: Allergan Rejects Valeant's Deal).
Allergan plans to hold a special meeting of its stockholders on Dec 18, 2014. We expect investor focus to remain on further updates from the proposed acquisition.
Allergan currently carries a Zacks Rank #3 (Hold). Investors interested in the health care sector can consider stocks like Johnson & Johnson (JNJ) and Bristol-Myers Squibb (BMY). Both carry a Zacks Rank #2 (Buy).
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