Valeant says plans to 'improve' offer for Allergan
By Rod Nickel and Caroline Humer
(Reuters) - Valeant Pharmaceuticals International Inc said on Tuesday it will "improve" its unsolicited $47 billion (27.9 billion pounds) takeover offer for drugmaker Allergan Inc, a day after the U.S. company rejected the bid.
Canada's Valeant said it would make the change to its cash and stock offer at a May 28 webcast in which it will discuss details of its plans for Allergan's business. Valeant said it remained committed to getting the deal done but would remain "financially disciplined."
"We will not stop our pursuit of this combination until we hear directly from Allergan shareholders that you prefer Allergan's 'stay the course plan' to a combination with Valeant," Valeant Chief Executive Michael Pearson said on Tuesday in a letter to shareholders.
Allergan, which makes the popular anti-wrinkle treatment Botox, said on Monday that Valeant's business model was unsustainable and the offer was too risky because of uncertainty about the company's long-term growth.
Valeant's signal of an improved offer near the end of the month sets up an intense two-week period for the two sides to sway shareholders, some of whom own stock in each company. Valeant, and Allergan's biggest shareholder, Pershing Square Capital Management, have said they may conduct a referendum of Allergan investors on whether the target company's board should negotiate with Valeant.
"They're both trying to convince Allergan's shareholders that they have the best strategy, so that takes time," said analyst Tim Chiang of CRT Capital Group.
Allergan shares rose 1.2 percent to $161.68 in New York, while Valeant stock crept up 0.4 percent to $130.63.
An offer with more cash may reduce perceptions of risk associated with Valeant's fast-moving stock. But Valeant is also mindful of how leveraged it is after several years of brisk buying.
It has set a goal of reducing this year its ratio of net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to below four times. The ratio was around 4.5 times in January, and acquiring Allergan under the existing terms would reduce it to about three times, Valeant has said.
Allergan spokeswoman Bonnie Jacobs declined to comment on Tuesday.
Valeant's pursuit of Allergan is part of its strategy to become one of the five-biggest drug companies by market capitalization by the end of 2016. The pharmaceutical industry may see the busiest pace of acquisitions since last decade, led by Pfizer Inc's $106 billion offer for AstraZeneca.
Valeant, fresh off its purchase of Bausch & Lomb Inc last year, and investor William Ackman of Pershing Square Capital Management made an offer for Allergan on April 22. Allergan put in a so-called "poison pill" within days to slow Ackman from increasing his nearly 10 percent stake in Allergan.
Valeant said at that time it planned to cut costs at Allergan by about $2.7 billion, including in research and development.
((Reporting by Rod Nickel in Winnipeg, Esha Dey in Bangalore, Caroline Humer in New York; Editing by Saumyadeb Chakrabarty and Sofina Mirza-Reid))
