Hedge fund mogul and activist investor Bill Ackman is working with Valeant to hold a shareholder meeting to vote on a measure that would oust most Allergan’s board of directors, while Valeant is looking to take its acquisition proposal straight to shareholders.
Analysts at Sterne Agee were skeptical of the board ouster, saying that conversation with shareholders suggest that they are willing to give Allergan leadership a few months to "develop a strategy that can deliver greater shareholder value than what a merger with Valeant can offer."
"The Allergan executive team is one of the best and most shareholder-focused in the pharmaceutical industry, and our extensive experience with this team leaves us confident that management will either have a solid, value enhancing plan for Allergan or will chose to negotiate better merger terms with Valeant," Sterne Agee analyst Shibani Malhotra wrote in a note to investors today. "Investors who we have spoken with concur that it is highly unlikely that management will block a merger with Valeant simply to keep Allergan independent."
Valeant’s latest strong-arm tactics come just days after the company twice sweetened the pot as it continues to pressure Allergan leadership to accept a buyout offer now valued at $53.3 billion. Valeant is now offering $72 per share, up from the $58.50 offer made earlier last 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, adding that the new offer "substantially undervalues Allergan."
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 came 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 month Pershing defended the bid, with Ackman urging Allergan’s board to concede to a meeting to explore the offer.