(Reuters) – Canadian drugmaker Valeant Pharmaceuticals International Inc VRX.TO VRX.N raised the cash component of its unsolicited offer for Botox-maker Allergan Inc AGN.N, but the increased bid fell short of expectations and the stock of both companies fell.
Valeant’s sweetened offer on Wednesday, valuing the U.S. firm at US$49.44 billion, also included a contingent value right that could be worth an additional US$7.6 billion.
“I was actually surprised (Valeant) didn’t go higher,” said David Amsellem, analyst at Piper Jaffray. “Clearly they are going to continue to be aggressive, making a full-court press to get this done.”
Valeant’s New York-listed shares dropped 1 percent by midday to US$128.66, paring earlier losses, while Allergan stock lost 4.1 percent to US$158.29.
Valeant on Wednesday offered to pay US$58.30 per Allergan share in cash, about US$10 higher than its previous offer of US$48.30. The stock component remains 0.83 of a Valeant share for each Allergan share.
The new offer values Allergan at US$166.16 per share as of Tuesday’s closing price, and is about 8.6 percent higher than the previous bid of US$153 as on April 22 when Valeant first made its offer.
That offer, by Valeant and activist investor Bill Ackman, was worth US$47 billion and was spurned by Allergan, which said the Canadian company had overstated possible savings. Allergan is best known for its lucrative Botox product, a medicine injected into muscles to smooth wrinkles and treat various ailments.
Valeant’s offer on Wednesday was lower than the US$180-$200 per share that investors were looking for, according to an investor survey last week.
But the new offer also includes a contingent value right—a right to receive additional benefit—worth up to US$25 per share related to the sales of Darpin, Allergan’s experimental eye drug that is seen as a potential competitor to Regeneron Pharmaceuticals Inc‘s REGN.O successful medicine Eylea.
“Allergan shareholders want this deal to occur, but they want a higher price and the optionality on Darpin,” Valeant Chief Executive Michael Pearson said in a meeting in New York with several hundred shareholders of the two companies. “We think the offer we made this morning addresses both of those concerns.”
Allergan said it will review and consider the revised proposal.
Even as news of the revised offer settled in, Pearson fielded questions about the company’s next moves.
Valeant expects Securities and Exchange Commission approval shortly to hold a non-binding vote of Allergan shareholders by early July, Pearson said, a move aimed at pressuring Allergan to negotiate. He also said the company is willing to take its offer directly to Allergan shareholders and force a special meeting.
“We are open to any and all approaches to try to get this deal consummated,” he said. “It would be a real shame if we can’t engage the board and management to get this done sooner rather than later.”
The company is open to a split if it becomes too large, Pearson said, adding that Valeant’s “objective in life is not just to become large.”
Pearson said in January that the company will look to become one of the world’s top five pharmaceutical companies by market capitalization by the end of 2016.
Valeant’s 3-1/2 hour meeting with investors was intended to blunt Allergan’s criticisms about its organic revenue growth, management experience and its aggressive approach to acquisitions.
Separately, Valeant said Wednesday it would sell some of its skincare treatments business, including facial fillers for treating wrinkles, to Nestle SA NESN.VX for US$1.4 billion in cash.
That sale suggests Nestle is not a potential white knight acquirer for Allergan, and removes a possible antitrust risk to a Valeant-Allergan merger, JPMorgan analyst Chris Schott said.
(Reporting by Esha Dey in Bangalore, Rod Nickel in Winnipeg, Manitoba and Caroline Humer in New York; Editing by Savio D’Souza and Sofina Mirza-Reid)
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