Valeant, Bill Ackman bid for Allergan gets more hostile

The largest shareholder at Allergan Inc. is seeking to replace a majority of directors at the Botox maker as part of a plan to back a proposed takeover by Valeant Pharmaceuticals International Inc.

Pershing Square Capital Management, the investment firm headed by Bill Ackman, launched a call for a special meeting of shareholders at the U.S. company, which has been highly critical of Valeant and its takeover bid.

"We think Allergan's board and management are delaying the inevitable, we encourage them to negotiate with Valeant immediately," Ackman told a conference call with financial analysts Monday.

"If they negotiate immediately, a merger agreement could be signed in a week, this transaction could get done in a matter of months," he said.

Ackman pushes for merger

The move by Pershing Square follows meetings it held last week with other large Allergan shareholders as well as hedge funds and risk-arbitrage investors, who combined with Ackman held more than half the shares in Allergan.

"They believe the merger makes tremendous sense and it is a highly strategic transaction and creates enormous shareholder value," Ackman said the investors told him.

We think Allergan'sboard is delaying the inevitable here- Bill Ackman, CEO, Pershing Square Capital Management

Allergan urged shareholders Monday to wait until the company's board has made a recommendation before doing anything.

"Under federal securities laws, Pershing Square and Valeant cannot solicit proxies from Allergan stockholders until Pershing Square and Valeant provide stockholders with definitive proxy solicitation materials," the company said.

$54 billion deal

On Friday, with the backing of Pershing Square, Valeant raised its stock-and-cash hostile offer to about US$180 per share, valuing Allergan at more than US$54 billion.

The company has offered US$72 in cash and 0.83 of a Valeant share for each Allergan share, contingent on "good faith negotiations" of a merger agreement.

• Valeant boosts offer for Allergan
• Allergan rejects Valeant bid

Pershing Square also agreed to accept less than other shareholders in an effort to see the Valeant deal done. The investment firm will forgo any cash and receive 1.22659 Valeant shares for each Allergan share.

"The only way we make back what we gave up is the scenario in which the stock price increases from $131 to $180 a share by the time the transaction closes. So either we're dumb or we really believe in what we're saying," Ackman said.

Allergan said it would carefully review the revised offer and pursue what it thought was the best interests of the company and all of its shareholders.

Concern over Valeant's business model

The company has repeatedly raised concerns about Valeant's business model and stock value and questioned its ability to find the $2.7 billion in cost savings it has promised if the deal is successful.

BMO Capital Markets analyst Alex Arfaei suggested the new offer by Valeant "significantly" improves the odds the deal will be successful.

"The 55 per cent premium offered, relative to the undisturbed price, will likely increase if the companies start negotiating as Valeant shares will likely rise, increasing the probability of a deal," Arfaei wrote in a note to clients.

"We believe it could have been triggered by the market's negative reaction to the previous offer, feedback from Allergan shareholders, and/or new knowledge of a potential white knight, although this is unlikely."