Valeant’s higher bid for Allergan fails to sway shareholders

Valeant’s higher bid for Allergan fails to sway shareholders

Pharmaceuticals giant Valeant International on Wednesday raised its unsolicited bid for Allergan, but even the higher bid fell short of analysts as well as shareholders' expectations.

Valeant yesterday raised its offer for Allergan to around $49.4 billion. The pharmaceuticals giant added more cash to the hostile bid. The Quebec-based firm said Allergan shareholders would receive cash & stock of about $166.16 per share, along with a contingent value right valued at around $25 per share if a tentative eye drug meets sales goals.

The original offer, which was announced on April 22, was valued at around $152.89 per share. That offer did not include a contingent value right.

But, even the new offer failed to convince shareholders. Shares of both firms slipped immediately after the announcement of the new offer yesterday, hinting that the higher offer fell short of expectations.

Vamil Divan, an analyst with Credit Suisse, said, "New offer is better, but may not be compelling enough given Allergan's strong stand-alone outlook. Given that the majority of the offer would still be in Valeant stock, how one values Valeant stock goes a long way to determining the true value of the deal."

Allergan, the maker of Botox, also challenged Quebec-based firm's claims that it can slash $2.7 billion in spending at Allergan without hurting research & development, sales and marketing.

Bernstein Research's Aaron Gal said that even the higher offer underestimated Allergan's value as an individual entity.

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