UPDATE 1-Allergan readies defense as it fights Valeant for votes

Tue Jul 1, 2014 2:02pm EDT
 
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By Caroline Humer and Deena Beasley

NEW YORK and LOS ANGELES, July 1 (Reuters) - Allergan Inc may take on debt to buy back its own shares as part of a multi-faceted plan to thwart a $53 billion takeover bid by Valeant Pharmaceuticals International Inc and activist investor William Ackman.

The company is also considering making acquisitions of its own and more spending cuts to increase shareholder value, Chief Executive David Pyott said in an interview, outlining steps to build support for Allergan, best known for its Botox anti-wrinkle injections, to remain a standalone company.

But Allergan, which is expected to unveil the plan when it releases second-quarter results sometime in July, faces an uphill battle.

Valeant says it already has enough shareholders on its side to call a special meeting to replace Allergan board members with nominees who support its takeover proposal. To call a meeting, the acquisitive Canadian company needs support of the holders of at least 25 percent of the shares.

It is possible that Allergan can turn the tide, but it won't be easy, said Ronny Gal, an analyst at Sanford C. Bernstein.

"When I run my numbers, a buyback alone doesn't quite cut it," Gal said. "A buyback plus another round of costs cuts, or the acceleration of the discussed cost savings, does."

An Allergan acquisition could help as well if it increases the company's profits, Gal said. In order to get near-term investors on its side, Allergan needs to deliver another $10 per share of value in 2015 or $11 per share in 2016, he said.   Continued...