Valeant Pharmaceuticals share price up, raises takeover bid for Allergan to $53 billion

Valeant Pharmaceuticals International Inc raised its takeover offer for Botox maker Allergan Inc for the second time this week in an ongoing effort to secure a deal that would value Allergan at about $53.3 billion.

Valeant has teamed up with Bill Ackman, whose hedge fund Pershing Square Capital Management LP owns a 9.7% stake in Allergan, to push the deal. Under its terms, Allergan shareholders would receive $72 a share in cash, up from the previous offer of $58.30, and 0.83 Valeant shares per Allergan share they own, thus forming a $179.25 cash-and-stock portion of the bid which values Allergan at around $53.3 billion.

Bill Ackmans Pershing Square met with the majority of Allergans biggest shareholders on May 29th who agreed the deal could come through at a valuation of $180 per share, a person familiar with the matter said. Pershing agreed to forgo the cash portion of the offer and receive only stock so that Valeant could increase the offer for other shareholders.

Valeant intensified its takeover effort only two days after it lifted its initial bid to $49.5 billion and raised the cash component of its offer. The swift second improvement was seen as unusual but underscored Valeants determination to purchase Allergan after the Botox maker rejected the initial offer on April 22nd, saying it had undervalued the company. It consisted of $48.30 in cash and 0.83 of Valeant shares, without a CVR.

Michael Pearson, Valeants Chief Executive Officer, said, cited by the Financial Times: “We are very committed to getting this deal done, and are now modifying our offer with the assistance of Mr Ackman’s Pershing Square to increase the economics for all Allergan shareholders.”

Allergan had also voiced concern that if the Valeants business model is applied to its structure, it would decelerate the fulfillment of Allergans strategy and have negative impact on growth and R&D. Valeant however vowed on Wednesday it would invest as much as $400 million to develop Allergans eye drug DARPin, which has faced delays but has huge sales potential, estimated to as much as $20 billion in the first ten years.

Valeant Pharmaceuticals International Inc jumped by 1.59% on Friday to close the session in Toronto at CAD 142.34 per share, marking a one-year change of +51.80%. The company is valued at 47.48 billion Canadian dollars.

Allergan Inc surged 5.65% to settle at $167.46 on Friday in New York, marking a one-year change of +65.69%. The drug maker is valued at $49.38 billion. According to CNN Money, the 18 analysts offering 12-month price forecasts for Allergan Inc have a median target of $187.50, with a high estimate of $207.00 and a low estimate of $130.00. The median estimate represents a +11.97% increase from the last price of $167.46.