Valeant Pharmaceuticals International, Inc.
) announced that it has commenced an exchange offer for the common
As per the terms of the offer, shareholders of Allergan can
exchange each of their shares for $72.00 in cash and 0.83 shares of
Valeant common stock. Allergan shareholders can also opt for cash
and a number of Valeant shares, subject to proration.
We note that the tender offer will expire on Aug 15, 2014. Once
the exchange offer expires, Valeant expects to complete a
second-step merger to acquire the remaining Allergan shares.
In addition, Valeant indicated that it is keen to provide
Allergan shareholders with a contingent value right related to
DARPin sales if the latter engages in negotiations to work out the
Meanwhile, Allergan will now review and evaluate the tender
offer and has urged its shareholders not to take any action before
the Board reviews the exchange offer.
The hostile bid from Valeant does not surprise us. Valeant has
been relentlessly pursuing Allergan since Apr 2014. Earlier in the
month, Allergan announced that its Board of Directors has
unanimously rejected the revised acquisition offer by Valeant
Pharmaceuticals International, Inc.
On May 30, 2014, Valeant proposed a revised offer to Allergan
whereby each Allergan share would be exchanged for $72.00 in cash
and 0.83 shares of Valeant common stock. Valeant offered a
contingent value right of up to $25.00 per share for Allergan's
ophthalmology pipeline candidate, DARPin. The candidate is
currently in phase II.
This was the second time that Valeant had upped its offer. We
note that Allergan's largest shareholder, Pershing Square Capital
Management, L.P, with a 9.7% stake in the company, had agreed to
elect only stock consideration in the transaction and exchange
their Allergan shares for Valeant shares at a 1.22659 exchange
ratio (based on closing share price on May 29).
Valeant had proposed in Apr 2014 that each Allergan share would
be exchanged for $48.30 in cash and 0.83 shares of Valeant's common
stock. Thereafter, the company upped its offer by 21% wherein the
cash consideration of the offer was increased by $10.00 per share
However, Allergan cited that the revised offer substantially
undervalues the company, creates significant risks and
uncertainties for the stockholders of Allergan, and is not in the
best interests of the company and its shareholders.
Valeant currently has a Rank #3 (Hold) while Allergan carries a
Zacks Rank #1 (Strong Buy). Valeant has been quite active on the
acquisition front in the last couple of years. Valeant is a
specialty pharmaceutical company, primarily focusing on
dermatology, neurology and ophthalmology, among others. The company
acquired Bausch+Lomb in 2013.
We expect investor focus to remain on further updates from the
Some better-ranked stocks in the healthcare sector include
). While Gilead Sciences carries a Zacks Rank #1, Alexion Pharma
has a Zacks Rank #2 (Buy).
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ALEXION PHARMA (ALXN): Free Stock Analysis
ALLERGAN INC (AGN): Free Stock Analysis Report
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VALEANT PHARMA (VRX): Free Stock Analysis
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