Valeant Pharmaceuticals International Inc. said it plans to sweeten its rejected cash-and-stock offer for Botox maker Allergan Inc. after talking to investors of the targeted company.
Valeant Chief Executive officer Mike Pearson will explain why the bid is “substantially superior to an Allergan ‘go it alone’ strategy” on a May 28 call after Valeant holds its shareholder meeting, the Laval, Quebec-based company said today in a statement.
At that time, “we plan to improve our offer for the company -- to demonstrate our commitment to getting this deal done,” Pearson said in a letter to Allergan shareholders released today.
Valeant’s memo was followed by a preliminary proxy filed by Allergan’s largest investor, Bill Ackman’s fund Pershing Square Capital Management LP, which owns 9.7 percent of the company’s shares.
“We believe the market has spoken, and that shareholders see substantial value in the merger proposal,” Pershing Square said in its regulatory filing, urging Allergan’s board to “promptly engage in good faith discussions with Valeant” on merging. The hedge fund called for a shareholder meeting to vote on a referendum to facilitate talks.
The bid of $48.30 in cash and 0.83 of a Valeant share, or about $45.7 billion at the time it was announced, “substantially undervalues” the Irvine, California-based company, Allergan Chief Executive Officer David Pyott said yesterday. Valeant needs to increase the cash component to make the offer attractive to investors, said Shibani Malhotra, an analyst with Sterne Agee & Leach Inc.
“They need to show why the combination of the two companies will drive value and greater value than Allergan as it stands on its own company,” Malhotra said in a telephone interview from New York. The total bid needs to be a minimum of $185 to $190 a share to interest Allergan investors, she said.
The current offer values Allergan at about $155.91 a share, based on today’s closing price for Valeant.
Allergan spokeswoman Bonnie Jacobs and Valeant spokeswoman Laurie Little didn’t return phone calls seeking comment.
Allergan rose 1 percent to $161.28. The stock has gained 14 percent from April 21, before the Valeant bid came to light. Valeant fell less than 1 percent to $129.64.