VRX - Valeant Pharmaceuticals International Inc.

[Guest wellmont]

if they go ahead and do the salix deal they may be able to block vrx. but they will still be thrown out for treating their own shareholders with such contempt. they will be poster child for what's wrong with corporate boards.

[Liberty]

if they go ahead and do the salix deal they may be able to block vrx. but they will still be thrown out for treating their own shareholders with such contempt. they will be poster child for what's wrong with corporate boards.

 

It all depends if they've drunk the koolaid...

[Liberty]

http://dealbook.nytimes.com/2014/10/01/proxy-advisory-firm-seeks-shareholder-vote-at-allergan-maker-of-botox/

 

 

In a report published on Wednesday, Institutional Shareholder Services amplified calls for Allergan’s board to hold off from making an all-cash acquisition that would scuttle an existing takeover offer from Valeant Pharmaceuticals and Pershing Square Capital Management. [...]

 

I.S.S. noted that in recent days, Allergan’s responses to investor’s concerns have sidestepped the main issue, containing “nary a word addressing the more crucial question raised by each of those major shareholders of whether it will enable or frustrate a decisive shareholder vote on the competing strategic alternatives.”

[Liberty]

So the latest is this soap opera is apparently that Salix isn't buying Cosmo, talks between Allergan and Salix have grown cold, and Actavis is more interested in buying Salix.

 

http://dealbook.nytimes.com/2014/10/02/push-by-allergan-to-acquire-salix-loses-steam/

 

http://dealbook.nytimes.com/2014/10/03/salix-calls-off-inversion-deal-with-irish-arm-of-drug-maker-cosmo/

 

http://www.bloomberg.com/news/2014-10-02/salix-said-in-talks-to-sell-to-actavis-as-allergan-fades.html

 

http://www.bloomberg.com/news/2014-10-03/allergan-tips-to-valeant-in-deal-chain-reaction-real-m-a.html

 

It looks like the market is starting to believe that VRX will get AGN. AGN is now trading above 180 for the first time, which is the magic number that Ackman said would get shareholders to agree to a deal.

 

There could still be a twist, but after AGN's 4 biggest shareholders (and we know that Paulson agrees too, even if he hasn't said it yet) came out publicly against it doing a cash deal to kill interest from VRX and ACT and ISS concurred, it's becoming harder reputationally to pull a big rabbit out of the hat (though certainly not below this management team -- they care about keeping their jobs, not doing what the owners of the business want).

[Picasso]

    Oct. 7 (Bloomberg) -- Allergan would be open to sale, would

consider proposal >$200/shr, Reuters says, citing people

familiar.

• Actavis may reiterate takeover interest as soon as this wk

• NOTE: AGN hit record high today of $186.75

[mankap]

VRX increases the AGN offer. It is at $191 now. Did VRX increase the offer after getting some agreement with AGN.

[Liberty]

http://online.wsj.com/articles/valeant-pershing-square-plan-to-boost-allergan-bid-by-15-a-share-1412718344

 

http://video.cnbc.com/gallery/?video=3000317968

[original mungerville]

If VRX gets ahold of Allergan, I think VRX at these prices is a great deal and would be a back-up the truck opportunity.

 

Obviously, the main issue is the deal going through. Any views on odds of the Allergan deal going through this point - I have no idea.

 

 

[KCLarkin]

Any views on odds of the Allergan deal going through this point - I have no idea.

 

Based on Allergan's stock price, the odds are very high that a deal will go through (>95%). The question is:

a) Will Valeant or Actavis win the bidding war?

b) If Valeant, will the price be too high (Allergan shareholders capture all the value)?

[Liberty]

Question for those with a lot of experience with arbs: If Actavis gets Allergan, all the arbs that bought AGN and shorted VRX will need to cover. What is the usually effect of that on stock price?

 

On first level thinking, increased demand for the stock should make the price go up. But on second level, I can see how after a deal fails there must be a pessimism spike and the arbs are probably buying back from that volume, so it might not actually have much of a net impact.

 

Just curious to hear from people who've seen that actually play out many times before. Thanks.

[original mungerville]

Any views on odds of the Allergan deal going through this point - I have no idea.

 

Based on Allergan's stock price, the odds are very high that a deal will go through (>95%). The question is:

a) Will Valeant or Actavis win the bidding war?

b) If Valeant, will the price be too high (Allergan shareholders capture all the value)?

 

Greater than 95% seems too high to me just intuitively - I wonder if there is something else at work here and that the probability is not reflected only by AGN's stock price. (Also, I thought that Activis was kinda out of the picture... is that not the case?) 

[lu_hawk]

Thankfully, Valeant prefers an accounting system where the level of "cash earnings" will be the same regardless of the price paid for Allergan (assuming the deal goes through, and ignoring the small variation due to interest expense).

[Liberty]

Thankfully, Valeant prefers an accounting system where the level of "cash earnings" will be the same regardless of the price paid for Allergan (assuming the deal goes through, and ignoring the small variation due to interest expense).

 

Will the debt and number of shares outstanding stay the same too?

[Liberty]

One more twist:

 

http://business.financialpost.com/2014/10/16/bill-ackman-cites-evidence-that-takeover-target-allergan-tried-to-malign-suitor-valeant-with-false-statements/

[Liberty]

Q3:

 

http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Valeant-Pharmaceuticals-Reports-Third-Quarter-2014-Financial-Results/default.aspx

 

2014 Third Quarter Results

Total Revenue $2.1 billion; an increase of 33% over the prior year

Total same store sales organic growth was 19%, including impact from generics

Bausch + Lomb organic growth was 12%, adjusted only for foreign exchange

GAAP EPS $0.81; Cash EPS $2.11, an increase of 48%

GAAP Operating Cash Flow $619 million, an increase of 207%; Adjusted Operating Cash Flow $771 million, an increase of 89%

Net debt reduced to $15.5 billion, with net leverage ratio approximately 4 times adjusted pro forma EBITDA

2014 Guidance for Cash EPS updated to $8.22 to $8.32 to reflect third quarter outperformance and stronger expected fourth quarter financial results

Fourth quarter Cash EPS raised to $2.45 to $2.55

Expect double-digit same store organic growth in the fourth quarter

2015 Outlook raised to 10%+ Organic Growth and $10.00 Cash EPS, assuming no acquisitions

[original mungerville]

Debt levels coming down while earnings rising. What else should one have expected from a value-adding acquirer pausing for a year?

 

The Allergan acquisition looks like a free option at this point.

[Liberty]

As is their habit, Allergan launched a preemptive attack on VRX this morning:

 

http://agn.client.shareholder.com/secfiling.cfm?filingID=1193125-14-375382

[Liberty]

Because things never stand still for a second, there's now apparently some rumors that AGN is in talks with Shire...

 

http://seekingalpha.com/news/2041555-allergan-shire-marriage-possible

 

Not sure how credible that is, or if it's just a strategy to get VRX to pay more...

[Liberty]

Today's episode of the soap opera:

 

http://blogs.reuters.com/alison-frankel/2014/10/21/pershing-valeant-allergan-ignored-goldman-advice-to-talk/

[Liberty]

As is their habit, Allergan launched a preemptive attack on VRX this morning:

 

http://agn.client.shareholder.com/secfiling.cfm?filingID=1193125-14-375382

 

And here's the response:

 

http://valeant.q4cdn.com/546f4634-93db-409a-8670-7db922575db3.pdf

[Liberty]

Transcript from Ackman's deposition in the allergan court case:

 

http://go.bloomberg.com/assets/content/uploads/sites/2/ackman-depo.pdf

 

P. 139-142 nails it.

[Liberty]

http://nypost.com/2014/10/24/editor-firing-eyed-in-botox-takeover-battle/

 

Botox maker Allergan convinced a trade publication to kill an interview with Valeant CEO Michael Pearson and fire the editor who wrote it amid an ugly takeover battle between the two drug giants, newly released court documents reveal. [...]

 

The article, entitled “Why Valeant wants Allergan and what they’ll do with it?” was written by then Executive Editor Rich Kirkner.

It was online for two days before Pyott’s subordinates convinced the publisher to pull it and recall all 18,000 of its August magazines that were in transit, according to an email to Allergan executives from Rebecca Winter, Allergan’s product manager of strategic communications for Dry Eye, one of its eye products. [...]

 

The publication’s publisher, Doug Parry, “shared how much they value their longstanding relationship with Allergan and took ‘swift action’ to kill the story, “release the editor of his role” and add new “editorial controls,” she wrote on Aug. 15.

 

Wow.

[Liberty]

Valeant letter to Allergan's board:

 

http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Valeant-Delivers-Letter-To-Allergan-Board/default.aspx

 

October 27, 2014

 

Board of Directors

Allergan, Inc.

2525 Dupont Drive

Irvine, California 92612

 

Dear Board of Directors,

 

One month ago I extended an olive branch, which was summarily rejected the same day. You have refused all of our offers to meet and answer any questions you may have about Valeant or about our offer. Instead, you have allowed management to continue making baseless attacks.  Our third quarter earnings have clearly refuted those attacks and fully validated our business model.

 

Allergan would not be trading anywhere near where it is absent our offer, and our offer, even at Valeant's current stock price, represents a very substantial premium. Allergan's shares were trading at $110 at the beginning of the year, and $117 before we made our offer. The market and peer group are flat this year. Given this, it is unimaginable that Allergan would be trading anywhere near where it is now without our offer, even with the cost cuts you belatedly put in place in direct response to us.

 

We believe our stock is trading at artificially low levels – our shareholders are telling us that our shares should be trading at more than $150 per share. Your own banker had Valeant on its "Conviction Buy List" with a target price of $164 before we made our offer and before we provided our 2015 outlook – and that didn't take account of the upside and synergies that would result from a merger. A trading price of $150 is only 15 times analyst consensus for 2015 Cash EPS.

 

To be clear, Valeant is prepared to improve its offer and provide value to your shareholders of at least $200 a share. We are confident that an increase in our stock price, and in consideration, will provide that value. No other potential acquirer of Allergan has the operational and tax synergies that we have, and no other potential acquirer of Allergan can provide the value that we can.

 

Since we made our offer many of your long only shareholders, including your largest shareholder other than Pershing Square, have sold down or out. A number of your remaining large long only shareholders publicly expressed their concerns regarding actions you had been contemplating, and we understand that a number have privately expressed those concerns as well. Both ISS and Glass Lewis have been highly critical of the Board.

 

Management has shown its true colors through "horse-choking" bylaws, baseless attacks and frivolous litigation.  It is past time for the board to take control of this process, do what is right for the Allergan shareholders and come to the table.  December 18 is not far away.

 

Sincerely,

 

J. Michael Pearson

Chairman & Chief Executive Officer

[giofranchi]

http://www.marketwatch.com/story/allergan-board-skeptical-of-valeants-offer-to-improve-bid-2014-10-27

 

"Allergan believes that any assertion that Allergan's stock would be trading near its first quarter trading price absent the Valeant offer is not substantiated by fact," said the statement. Allergan shares were trading up 1.3% in premarket trade, and are up about 66% in the year so far, while the S&P 500 has gained 6.3%.

 

Hilarious! ;)

 

Gio

[Liberty]

Yesterday, I was re-listening to Ackman's presentation from July 17 on Allergan. Man, I had forgotten some of the crazy anti-shareholder stuff they did (there's so much, hard to keep track of everything). Anyone who hasn't listened to that presentation and is interested in this saga should have a listen, IMO.

 

Here's AGN's Q3:

 

http://agn.client.shareholder.com/earningsreleasedetail.cfm?ReleaseID=878172

 

Looks good at first glance, but I take it with a big grain of salt. This management team will do anything to keep their jobs. When the stock was half the price that it is today, insiders were selling big amounts of stock. Now that they could lose their jobs (they are not significant shareholders) and the stock is much higher, they raise guidance, talk about a buybacks, and say Valeant's offer "grossly undervalues the company"...