ValueAct back on Valeant’s board, aims to secure Allergan acquisition

ValueAct Capital will return to Valeant Pharmaceutical’s board room, with the hedge fund expressing its desire to work with the pharmaceutical giant to try and secure the acquisition of Allergan Inc.

Allergan, the botox maker, has rejected numerous offers by Valeant, saying that its business model is too focused on growing through acquisitions.

Jeffrey Ubben, Chief Executive Officer of ValueAct Capital, said that he would try and help Valeant on its $53 billion acquisition offer of Allergan.

ValueAct had a representative on Valeant’s board before, however, in May, Mason Morfit, stepped down as he focused his efforts on Microsoft Corporation (the fund’s largest holding).

Jeffrey W. Ubben, said:

“Valeant has been an important component to ValueAct’s success over the past seven years and we strongly believe in Valeant’s business model and strategy. Valeant has become significantly undervalued on a standalone basis due to recent unjustified attacks on the company. We are strongly supportive of the Allergan-Valeant combination in light of their perfect strategic fit and the potential to create enormous shareholder value for both companies. ValueAct has not reduced its position in Valeant since leaving the Board in May and we expect to increase our already substantial position in Valeant. I look forward to working with Mike and the Board of Directors to help secure the Allergan transaction and then continuing to serve on the Board to deliver long-term value to all shareholders.”

Allergan made a statement today regarding the correspondence between Allergan and Valeant Pharmaceuticals International, Inc:

“Allergan’s Board of Directors and management team understand that the ongoing situation with Valeant and its partner, Pershing Square Capital Management, L.P. (“Pershing Square”), is purely a discussion about who can deliver greater value to Allergan’s stockholders. We have been very clear in our belief that we can create more value than Valeant’s offer and our recent actions have been focused on achieving that goal. Specifically, since Valeant first made its unsolicited proposal to acquire Allergan on April 22, 2014, Allergan’s leading growth trajectory has been accelerated further through:

Operational excellence, with Allergan demonstrating a continuation of the significant momentum in its businesses that began in early 2013, driven by strong double digit sales growth and numerous regulatory approvals around the world;

Outstanding sales growth in the second quarter of 2014, with significant contributions from nearly all of Allergan’s businesses and major products, translating into the greatest increase in absolute dollar sales during any quarter in the Company’s 64 year history;

Exceeding and raising guidance, with Allergan again delivering sales and earnings per share (EPS) growth above the high end of expectations, continuing the Company’s longstanding and consistent track record of delivering superior results; and

A restructuring and value creation plan that will significantly reduce costs by approximately $475 million annually relative to Allergan’s prior strategic plan, while preserving the strength of the Company’s R&D pipeline and its ability to deliver double digit sales growth during the next five years. Over the same five year period, Allergan expects to generate compounded annual adjusted EPS growth of more than 20 percent, which translates into $10.00 per share of adjusted EPS in 2016. Importantly, Allergan’s strategic plan will also generate considerable free cash flow of approximately $18 billion during the period, which provides significant upside to current EPS targets.”

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