The attempt by Valeant Pharmaceuticals, backed by activist investor Bill Ackman, to take over Allergan has escalated in a war of words, with Allergan CEO David Pyott standing firm in his refusal to sell the company. On CNBC’s Squwak Box on Thursday, Jim Cramer read a statement from Valeant and Bill Ackman that Pyott was involving his company in a “disabling conflict of interest, ” and that he was mainly concerned with, “losing his leadership role in the company … and likely his job.”
Pyott responded, “When I started Allergan, it was worth $2 billion. Before Pershing Square (Bill Ackman’s fund) appeared, Allergan was worth $42 billion, so I’ve got enough maybe to put a meal on the table. Unlike many other CEOs, I’m not interested what happens to me short-term. I only care about value creation of Allergan’s shareholders.”
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In mid-June, Allergan, the producer of Botox, rejected an offer to take over the company for $51 million. Ackman and Valeant filed an S-4 Registration statement and made a hostile exchange offer for all of Allergan’s shares. The deal will offer shareholders a contingent value right related to one of Allergan’s products, DARPin, which is in the pipeline. Clive Minchom in a JewishBusinessnews article writes that this “sweetener, ” is ” a case which the cynical might say may be a bit like bribing someone with their own money.”
David Pyott, in an interview on Jim Cramer’s Mad Money last week, said the Valeant’s bid dramatically undervalues his company, and may severely compromise Allergan’s commitment to its investment in research and development. He noted that in the past, Valeant has a tendency to aggressively “slash” budgets in the interests of cost-cutting. In an effort to fend off the hostile takeover bid, Pyott intimated that he was planning a major overhaul of the company; “We’re taking a deep look to see where we can do some trimming, ” Pyott said, “The only thing I care about is the creation of value for shareholders.”
A specific restructuring plan is expected to be outlined in Allergan’s upcoming earnings report. There is also talk that Allergan may be in the market for an acquisition of a smaller company. Meanwhile, shareholders will vote on the hostile takeover bid in a meeting scheduled for December, and until then, the battle between Allergan on one side and Valeant and Pershing Square on the other will rumble on.