Allergan would ‘carefully consider’ higher bid from Valeant

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Allergan Inc. says it would "carefully consider" a "substantially" higher takeover bid from Valeant Pharmaceuticals International Inc. after being told Valeant is prepared to "substantially" increase its offer.

Bill Ackman, the head of hedge fund Pershing Square Capital Management LP, said in a letter to Allergan's board on Friday that Valeant is in a position to make a considerably higher offer but that it should be within the context of a fair and equal bidding process between two bidders.

Pershing Square -- Allergan's largest shareholder with almost 10 per cent of the stock -- has partnered with Laval, Que.-based Valeant in its hostile takeover attempt.

The letter comes the day after Botox maker Allergan confirmed it is in talks about a potential transaction with another party, widely reported as being Actavis PLC.

"Now that [Allergan] is seriously considering a sale, it is incumbent upon the board to maximize shareholder value by running a sale process that will generate the highest value for shareholders," Mr. Ackman said in the letter filed with the U.S. Securities and Exchange Commission.

"We believe that Valeant can pay substantially more for Allergan by virtue of the strategic overlap between the two companies and the resulting cost and revenue synergies. Accordingly, any sales process that does not include Valeant is by its very nature likely to lead to a suboptimal outcome for shareholders."

The fairest approach is for Allergan to stage an auction "where neither party is the favored bidder, and both are encouraged to offer maximum value -- before any obligation to pay a breakup fee is incurred," Mr. Ackman said.

"We ask that you promptly initiate simultaneous negotiations with Valeant as well as any other potential acquirer in order to maximize shareholder value and fulfill your fiduciary duties."

Allergan has repeatedly rejected Valeant's attempts to win it over to its $55-billion (U.S.) hostile takeover proposal, saying it is "grossly inadequate" and significantly undervalues Allergan shares.

Allergan was recently rebuffed by a California court in its request to ban Valeant and takeover partner Pershing Square from voting their shares at a Dec. 18 meeting at which Pershing Square hopes to oust a majority of Allergan's board.

Allergan said in a brief response to Mr. Ackman's letter Friday that its board remains committed to value-enhancement for all shareholders but that Valeant's bids so far have been inadequate.

Valeant officials were not immediately available Friday to comment.

Mr. Ackman says in the Nov. 7 letter he understands Allergan's reluctance to sit down for talks with Valeant because such discussions could have led to a big jump in Valeant's stock price, "making it difficult for others to be competitive with a Valeant cash and stock offer. Much the same way, by beginning exclusive negotiations with Actavis, you are tipping the scales in Actavis' favor, disadvantaging Valeant and discouraging it from raising its offer."