Valeant Pharmaceuticals (NYSE:VRX, TSE:VRX) again increased its offer to Allergan (NYSE:AGN) shareholders, hoping to win them over with steep premiums as the company remains stalwart in refusing to open up to acquisition talks.
The new offer prompted an after-hours spike in AGN’s shares, which were up to $168.58 as of about 5:40 p.m., a 6.9% increase over this morning’s open at $157.66.
Valeant is now offering $72 per share, up from the $58.50 offer made earlier this week, which was in turn an increase over the initial $48.30 bid made last month. Analysts at BMO Capital Markets called the sweetened offer a "strange and unexpected twist" in the tumultuous history of the hostile takeover attempt.
"Just two days after Valeant CEO Mike Pearson said ‘I will assure you we are not going to keep offering against ourselves,’ he is doing just that," BMO analysts David Maris wrote today. "If Valeant management indicates the revised bid is in reaction to some Valeant shareholders wanting the proposed deal, we understand why Valeant shareholders covet Allergan’s balance sheet and growth."
Maris further added that the new Valeant offer "substantially undervalues Allergan."
"We believe other moves, such as a buyback or dividend, or a combination with or acquisition of a more like minded company is in the better interests of Allergan shareholders," Maris wrote.
Allergan issued a statement today acknowledging the offer, saying that it would "carefully review and consider" the formal proposal and "pursue the course of action that the Board believes is in the best interests of the Company and all of its stockholders."
The new deal represents a cash-and-stock value of $179.25 per share, including $72 in cash, 0.83 shares of Valeant stock and a $25 payout attached to certain revenue milestones for Allergan’s DARPin eye drug. The proposal is contingent on a "prompt good faith negotiation of a merger agreement between Valeant and Allergan."
"We strongly believe that applying Valeant’s operating philosophy, strategy, and financial discipline to a broader set of durable assets will continue to create substantial returns for shareholders over the short, intermediate, and long term," Valeant chairman & CEO J. Michael Pearson said in prepared remarks. "We are very committed to getting this deal done, and are now modifying our offer with the assistance of Pershing Square to increase the economics for all Allergan shareholders."
Allergan has been swatting back the acquisition pressure for weeks, saying that the company has had serious concerns with Valeant’s business model. The new bid comes just days after Allergan issued a presentation questioning Valeant’s organic growth, the performance of its acquisition of Bausch & Lomb and Medicis, its ability to provide scale and the stability of its leadership team, and other issues.
Shortly after Valeant and Pershing made the offer last month, Allergan swallowed a poison pill designed to insulate it from a takeover. Days later major Allergan shareholder Polen Capital Management said the company could do better. Last week Pershing defended the bid, with Ackman urging Allergan’s board to concede to a meeting to explore the offer.