Allergan rejects Valeant exchange offer, makes recommendation to stockholders

Allergan’s board of directors has unanimously rejected Valeant Pharmaceuticals’ unsolicited exchange offer to acquire all outstanding common shares of Allergan, the company announced in a press release.

Upon consulting with independent legal and financial advisors, the board determined the offer was “grossly inadequate, substantially undervalues the company, creates significant risks and uncertainties for Allergan stockholders, and is not in the best interests of the company and its stockholders,” according to the release.

Under the offer from Valeant, Allergan stockholders would exchange each share of common stock for 0.83 shares of Valeant common stock and $72.00 in cash, or subject to proration, an amount of cash or a number of Valeant shares with the implied value set forth in the exchange offer.

The implied value of the exchange offer is $173.20 a share, based on the closing price of Valeant’s stock on June 20, 2014, which is lower than the initial $179.25 per share implied value of Valeant’s May 30 re-revised proposal, according to the press release.

“Our board is unanimous in its determination that Valeant’s unsolicited exchange offer is grossly inadequate, substantially undervalues Allergan, and is not in the best interests of Allergan and its stockholders,” David E. I. Pyott, Allergan’s chairman of the board and CEO, said in the press release. “The board strongly recommends that Allergan stockholders reject Valeant’s exchange offer and prevent Valeant from taking control of Allergan at a price that does not appropriately reflect the underlying value of Allergan’s assets, operations and prospects, including our industry-leading position and projected growth opportunities.”

Allergan cited “highly questionable tactics” by Valeant and Pershing Square “in an attempt to facilitate a series of grossly inadequate proposals” in the press release. In addition, the release stated that “the urgency of the exchange offer disadvantages Allergan’s stockholders and evidences Valeant’s desperation to acquire Allergan to mask its continued weak organic growth.”

The Allergan board’s position on the exchange offer has been solicited to stockholders in a statement on Schedule 14D-9, which has been filed with the SEC and published on Allergan’s website, the release said.