Allergan adopts 'poison pill' defense in Valeant takeover bid

Takeover target Allergan Inc., the company that makes Botox, has adopted a "poison pill" defense intended to delay a buyout by Canadian company Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman.

The Irvine company's "stockholder rights plan" allows existing shareholders to buy Allergan stock at a steep discount if any single investor acquires more than 10% of its shares. That would drive down the value of the major investors' shares, making it unlikely that anyone would acquire that much stock.

The move seeks to prevent Ackman, who disclosed this week that he had acquired 9.7% of Allergan's shares, from significantly increasing his holdings.

Allergan announced its decision late Tuesday and said the program would be in place for one year.

Laurie Little, vice president of investor relations for Valeant, said the company was "disappointed that Allergan has taken this step."

"We hope that it won't preclude constructive engagement in the near term," she said in a statement. "We were pleased that Allergan has acknowledged its interest in hearing from shareholders."

Valeant, based in Laval, Quebec, and Ackman, chief executive of Pershing Square Capital Management, offered $46 billion in cash and stock for Allergan on Tuesday. They said combining the two companies would "create an unrivaled platform for growth and value creation in healthcare."

Allergan, which reported revenue of $6.3 billion last year, has 11,400 employees worldwide. In addition to Botox, which accounted for about $2 billion of its sales, the company sells ophthalmic medications, breast implants and a drug that thickens eyelashes.

One of its biggest revenue generators is Restasis, the only prescription drug to treat chronic dry eye, with $900 million in sales last year.

Valeant, which is on a push to expand through buying existing companies, acquired contact lens and eye care company Bausch & Lomb last year. It reported revenue of $5.8 billion in 2013.

Valeant and Ackman have offered stock and cash that, at Monday's closing price, would be worth about $152.89 a share, or $45.6 billion.

Several analysts said they thought that Allergan would reject the offer as too low. Allergan probably would also be unhappy about Valeant's plan to significantly reduce research and development spending, potentially eliminating hundreds or even thousands of high-paying jobs.

Allergan shares gained $2, or 1.2%, to $165.65 on Wednesday. Valeant fell $2.18, or 1.6%, to $133.23.

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