Valeant continues its efforts to buy Allergan by initiating shareholder ‘referendum’
Posted May 8, 2014 7:10 am.
This article is more than 5 years old.
MONTREAL – Valeant Pharmaceuticals is stepping up its fight for Botox maker Allergan, saying it plans to initiate a “shareholder referendum” of investors and may pursue a special meeting to remove some or all of the U.S. company’s board of directors.
The Quebec-based company said Thursday that the referendum would determine if Allergan’s shareholders want its board to negotiate with Valeant at the same time as it pursues alternatives to Valeant’s hostile takeover bid.
“We expect that this referendum will send a clear message to the Allergan board and to us that Allergan’s shareholders strongly support negotiations between our two companies in parallel with their other efforts,” chief financial officer Howard Schiller told financial analysts.
The California-based company has refused to enter into negotiations to discuss Valeant’s proposed US$48-billion cash and share offer. It responded by adopting a “poison pill” defence that will allow its board time to consider alternatives and potentially block the bid.
Two weeks ago, Valeant offered US$48.30 in cash and 0.83 of a Valeant share for each share of Allergan (NYSE:AGN). The offer would be worth about US$159 a share at Valeant’s trading price Thursday or almost US$48 billion. Allergan Inc. stockholders would own 43 per cent of the combined company.
During a conference call Thursday to discuss its first-quarter results, Valeant said it is “very committed” to getting the deal done to create “an unrivalled platform for growth and value creation.”
Schiller said several meetings with Allergan shareholders produced “overwhelmingly positive” feedback to its offer.
He said several themes emerged from the meetings, including that the deal will give shareholders value, there’s little push back to Valeant’s claim that Allergan’s research and development spending is too high and cost structure excessive, and that the two sides should start negotiations as soon as possible.
Chief executive Michael Pearson also said Valeant’s outlook on combining the companies was reinforced in talking to Allergan’s shareholders.
“It’s clear that they really see the compelling nature of this transaction and we have strong, strong support to get this deal done,” he said.
In the meanwhile, Valeant and its partner Pershing Square will request a shareholder list from Allergan, which it says the company is required to provide under Delaware law.
Valeant anticipates the proposed Allergan deal will result in more than US$2.7 billion in annual cost savings, 80 per cent of which would be achieved in the first six months. It says last year’s acquisition of eyecare company Bausch & Lomb is an example for removing layers of management while driving higher sales.
Meanwhile, Valeant reported Thursday that its revenues jumped 77 per cent to US$1.9 billion, while its profit adjusted for one-time items increased 48 per cent to US$599.7 million from US$405.2 million a year ago. That translated into US$1.76 per share, up from US$1.30 a year earlier.
Valeant (TSX:VRX) was expected to earn $1.72 per share in adjusted profits on US$1.97 billion of revenues, according to analysts polled by Thomson Reuters.
Including one-time items, it lost US$22.6 million or seven cents per share for the period ended March 31. That compared to a loss of US$27.5 million or nine cents per share in the first quarter of 2013.
Valeant said the loss includes restructuring, integration and other charges of $135 million primarily related to Bausch & Lomb purchase.
Neil Maruoka of Canaccord Genuity said with Valeant and Allergan reporting strong quarters, “the table is now set for a heightened battle” between the two companies.
“While Allergan’s board has stated that it will carefully review Valeant’s US$50 billion bid, we believe that it is likely considering other options including smaller acquisitions that would allow a tax inversion,” he wrote in a report.
The analyst said there is “a good chance” that Valeant’s bid will be successful, but will likely have to boost its cash offer.
Maruoka described Valeant’s first-quarter results as “solid” despite the slight revenue miss.
Valeant has said its goal is to be one the world’s top five pharmaceutical companies, with a market value of roughly $150 billion.
It was originally based in California and merged with Canada’s Biovail in 2010, headquartered in Mississauga, Ont. Valeant moved its global headquarters to Laval, near Montreal, in 2012.
On the Toronto Stock Exchange, Valeant’s shares gained 92 cents at C$145.98, and traded up 99 cents at US$134.34 in New York.
Follow @RossMarowits on Twitter.