In response to Valeant's apparently unwanted advances, yesterday it was reported the Allergan may be adopting a so called poison pill in response. The idea is to make Allergan more expensive and in many ways unattractive in the short term to Valeant. Valeant has a well known dislike for paying too much and is not high on heavy R&D based businesses. In this case, Allergan is enacting a provision that would allow general shareholders to buy discounted shares of stock (and thus dilute the company) if any one shareholder gains more than a 10% position in Allergan. By happenstance, a renegade shareholder aiding and abetting Valeant's takeover bid happens to hold a 9.7% share now. Hmmm!
Additionally, Allergan's CEO is talking about possibly accelerating their more than $10 B acquisition plans for 2014. This too would tend increase the expense of takng over the company and depending upon what was added could make it less attractive to Valeant on several fronts. Of course, it would not make a helluva lot of sense to current Allergan shareholders to buy a poor asset so we need a balance here.
All of this says that Allergan will put up a fight. Valeant while known to be resolved in these type of situations are also known not to want to waste a lot of time on an asset that is perceived to be too expensive. So a plan to make it less financially attractive could save Allergan from Valeant's clutches -- for now anyway. See Fierce Biotech.
Posted by Bruce Lehr April 25th 2014.