UPDATE 4-Allergan rejects Valeant Pharma's 'cut and slash' takeover

Mon May 12, 2014 2:50pm EDT
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* Allergan says offer undervalues company

* Allergan expects EPS growth of 20-25 percent (Adds Ackman's fund asking for Allergan shareholder list, paragraphs 10-11)

By Caroline Humer

May 12 (Reuters) - U.S. drugmaker Allergan Inc on Monday rejected Valeant Pharmaceuticals International Inc's $47 billion takeover offer, saying its proposed cost cuts were too steep.

Allergan, which makes the popular anti-wrinkle treatment Botox, said it believed Valeant's business model was unsustainable and that the offer was too risky because of uncertainty about the company's long-term growth.

"Valeant's model of cutting and slashing really doesn't work for more than a very short period of time," Allergan Chief Executive Officer David Pyott said during a conference call with investors to explain the rejection.

He said Valeant's plan for billions of dollars in cost cuts would prevent Allergan from delivering growth that it could produce on its own, and he set a target of a 20 percent to 25 percent increase in earnings per share in 2015.

Valeant and activist investor Bill Ackman, who has a stake of almost 10 percent in Allergan, made an unsolicited cash and stock offer for the company in April.

The next step in the Allergan-Valeant battle for control is for Valeant to raise its cash and stock offer and to present the offer to shareholders, analysts said on Monday.   Continued...