Under the deal, Allergan investors would receive $48.30 in cash and 0.83 of a Valeant stock for each share they own.
Ackman’s Pershing Square Capital Management (Pershing Square), Allergan’s largest stockholder at 9.7%, has agreed to take only stock in the transaction and plans to continue as a long-term shareholder of the combined company.
If successful, the acquisition is will bring together two mid-sized pharmaceutical companies with expertise in eye care, dermatology and cosmetic drug businesses.
The combination of the two companies is extremely compelling for both Allergan and Valeant shareholders and will create an unrivaled platform for growth and value creation in healthcare.
Valeant chairman and chief executive officer Michael Pearson said the proposal represents an undeniable opportunity to create extraordinary value for both Allergan and the company’s shareholders by establishing an unrivaled platform with leading positions in ophthalmology, dermatology, aesthetics, dental and the emerging markets.
"Together, we can capitalize on the inherent strengths and complementary portfolios of our two companies, while achieving significant synergies by applying Valeant’s unique operating model to a combined set of assets," Pearson said.
"While the Allergan CEO and Board of Directors made it clear, both privately and publicly, that they were unwilling to enter discussions with us about creating a value-enhancing combination, we are hopeful that our proposal for this extremely compelling combination will enable us to engage in productive discussions."
Annually, the new company is expected to invest over $300m on R&D in Phase III programs, current and future line extensions, and life cycle management programs.
It will continue to fund both companies’ late stage development programs, including those in dry eye, diabetic macular edema, glaucoma, migraine, eye whitening, psoriasis, and other dermatology areas.
Pershing Square chief executive officer William Ackman said the combination of Valeant and Allergan represents the most strategic and value-creating transaction that he has ever analyzed.
"I strongly urge the Allergan Board of Directors to carefully examine the proposed transaction and enter into negotiations with Valeant so that a merger can be consummated promptly," Ackman said.
"We will be electing all-stock consideration in the transaction so that we can remain a long-term holder of the combined company."
The proposed merger agreement that Valeant delivered to Allergan will be filed with the Securities and Exchange Commission.
Valeant’s financial advisors in the deal are Barclays and RBC Capital Markets, while legal advice is provided by Sullivan & Cromwell, Skadden, Arps, Slate, Meagher & Flom, and Osler, Hoskin & Harcourt.
For Pershing Square, legal advice is offered by Kirkland & Ellis and Davies Ward Phillips & Vineberg.
Image: Allergan headquarters in Irvine, California, US. Photo: courtesy of File Upload Bot (Magnus Manske)