Valeant Pharmaceuticals just increased the cash portion of its offer to buy out Allergan.
The company is now offering $US58.30 in cash per share, up from a previous offer of $US48.30.
It continues to offer 0.83 shares of Valeant for every share of Allergan.
The original deal first came to light after activist hedge fund manager Bill Ackman filed regulatory paperwork disclosing a 10% stake in Allergan.
Today’s news follows an announcement from Valeant earlier this morning that it would be selling several assets to Nestle. From the press release this morning: “Valeant Pharmaceuticals International, Inc. today announced that it has entered into an agreement with Nestle S.A. to sell all rights to Restylane, Perlane, Emervel, Sculptra, and Dysport owned or held by Valeant for $US1.4 billion in cash. Nestle expects to complete its acquisition of Galderma S.A. in July and would expect to operate the acquired assets through Galderma.”
Here’s the letter Valeant CEO J. Michael Pearson sent to Allergan CEO David Pyott today.
Dear Mr. Pyott,
As we publicly stated two weeks ago, today Valeant is increasing its offer for Allergan. Over the past several weeks, we have met with, and listened carefully to the views of, a number of Allergan shareholders. Our revised offer is based on specific feedback we received in our discussions and offers Allergan shareholders, for each Allergan share (1) $US58.30 in cash, representing an increase of $US10, or approximately 21%, in the cash portion of the consideration, (2) 0.83 of a Valeant share and (3) a new CVR related to DARPin® sales which would provide up to approximately $US25.00 per share of additional value based on the approximately $US20 billion in potential cumulative 10-year DARPin® sales referred to in your May 12th presentation. We are prepared to fund up to $US400 million to develop DARPin® and will pay 40% of the net sales of DARPin® referred to in your May 12th presentation after recovery of our shareholders’ investment in DARPin® development expenses. Shareholders will continue to be able to elect their mix of cash and shares, subject to proration, as well as receiving the CVR. We would propose to retain Allergan employees to continue development of DARPin® and will ask Allergan to provide us a list of eight independent scientific and business leaders. From these eight, we will select five to oversee DARPin® development and decide on all go / no-go decisions as the compound progresses. We will work with Allergan’s board and management to finalise the details of the CVR.
Our increased offer provides additional immediate value to the Allergan shareholders — we note that the cash portion of our revised offer alone represents approximately 50% of Allergan’s unaffected share price — and provides Allergan shareholders with significant substantial additional value if DARPin® achieves Allergan’s expectations.
It appears based on Allergan’s recent public statements that you have a fundamental misunderstanding of our business model and its performance. We would be delighted to provide you and the Allergan board with the opportunity to better understand our business model and address any concerns that you may have. This can be best accomplished by an in-person meeting with our team to better understand our business. A meeting of our respective teams will allow you to review the facts regarding our offer and enable you to provide your board with the information necessary to fulfil its fiduciary duty in assessing the value of a Valeant-Allergan business combination. We reviewed your consultants’ analysis in the report Allergan filed yesterday, which contained numerous errors and misstatements of facts. We hope you and your board have the opportunity to listen to our presentation later this morning, which we believe will address all your concerns regarding Valeant and our business model.
We strongly believe that applying Valeant’s operating philosophy, strategy, and financial discipline to a broader set of durable assets will create substantial long-term returns for Allergan shareholders over the short, intermediate, and long term, and exceed returns available to Allegan shareholders through alternative options, including a standalone alternative. As importantly, we believe the combined companies can better serve the patient and medical communities with a more complete offering of products and continued innovation in ophthalmology, dermatology, aesthetics, neurology and emerging markets.
Our discussions with Allergan’s shareholders, many of whom are also our shareholders, have continued to express enthusiasm about our potential business combination. We are confident they will view this offer — which delivers them greater upfront cash proceeds, the opportunity to continue to participate in the substantial cost and strategic synergies as a 43% shareholder of the combined company, and a CVR with significant upside based on the success of DARPin® — as one that merits your immediate engagement with us. We ask you once again to enter into discussions with us promptly so that we can consummate this mutually beneficial transaction in a timely manner. We look forward to hearing from you.
J. Michael Pearson
Chairman & Chief Executive Officer
cc: Allergan, Inc. Board of Directors
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