Valeant Pharmaceuticals International Inc can pay “substantially” more for Allergan Inc and should get a fair shot at buying it, Bill Ackman, the Botox maker’s biggest shareholder, said on Friday.
Ackman said this in a letter to Allergan’s board the day after the company said it was discussing a merger with another company, widely reported to be Actavis, to fend off hostile bidder Valeant.
Those Actavis discussions don’t sit well with Ackman, per his letter:
“We understand that you may have been reluctant to begin discussions with Valeant in that such discussions could have led to a large increase in its stock price, making it difficult for others to be competitive with a Valeant cash and stock offer. Much the same way, by beginning exclusive negotiations with Actavis, you are tipping the scales in Actavis’ favour, disadvantaging Valeant and discouraging it from raising its offer.”
Ackman then said that Allergan shouldn’t favour either bidder until it’s clear which one has the best offer.
He urged the board to run an auction “where neither party is the favoured bidder, and both are encouraged to offer maximum value — before any obligation to pay a breakup fee is incurred.”
No one like breakup fees.
Ackman owns 10% of Allergan — he’ll use that 10% stake to vote in favour of the company’s sale to Valeant on Dec. 18th. Earlier this week a California Judge ruled that the way Ackman purchased those shares with Valeant’s help raised “serious questions” as to whether insider trading rules were violated.
Allergan responded to Ackman’s letter promptly after it was made public with this stand offish statement:
“The Board remains focused on a single commitment, enhancing value for all of Allergan’s stockholders. If Valeant were to make an increased offer, the Board would carefully consider it and respond in due course. However, to date, as we have noted repeatedly, Valeant’s offers have been grossly inadequate and significantly undervalue Allergan.”
Valeant shares fell nearly 1 per cent in early trading on Friday amid talk that the company’s proposed plan to buy Allergan might collapse. Allergan stock was down 1.6 per cent.
Valeant and Ackman shocked Wall Street in April when they said they were working on a takeover deal that Allergan has steadfastly rebuffed as it tries to find another merger partner.
Ackman wants to replace most of the board next month at a special shareholder meeting and has written to the directors before, telling them to take their fiduciary duties more seriously.