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Valeant, Ackman Join Forces in $45B Allergan Bid

NEW YORK (The Deal) -- Valeant Pharmaceuticals International (VRX - Get Report) and activist investor Bill Ackman on Tuesday revealed the details of their combined hostile effort to acquire Botox-maker Allergan (AGN - Get Report), a move that is the well-known insurgent's first hostile acquisition partnership and one that would bring together two mid-sized pharmaceutical companies if consummated.

Valeant, a Canadian pharmaceutical company, said Tuesday it offered to swap each Allergan stock for $48.30 in cash and 0.83 shares of Valeant common stock. People familiar with the offer say that its total value is roughly $45 billion.

Ackman's fund, Pershing Square Capital Management, a $13 billion activist fund, revealed late Monday that it had acquired most of a 9.7% Allergan stake for $3.2 billion. The stake, which is currently all in options, is the largest single investment ever made by the activist investor. It was made as part of a joint venture known as PS Fund 1 LLC with Valeant's U.S. unit, which contributed $75.9 million to the investment. Valeant is based in Laval, Quebec.

Valeant noted that the offer represents a substantial premium to Allergan's stock price of $116.63 a share on April 10, before Ackman disclosed his fund had acquired close to 10% of the company.

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Valeant on Tuesday unveiled a powerpoint presentation explaining the rational for its offer to buy the Irvine, Calif.-based company. It suggested that a combined Valeant-Allergan would have $6.3 billion in sales, making it the second largest player in the global eye health industry after Alcon.

In the presentation, Valeant noted that Pershing has become Allergan's largest shareholder supporting the deal. It added that the insurgent fund has done "extensive due diligence" on Valeant and is committed both to getting a deal done as well as becoming a long-term shareholder of the combined company. In another Securities and Exchange Commission filing, Valeant said it would consult with Pershing Square before making any material decisions involving a business combination with Allergan.

According to people familiar with the situation, the groundwork for Ackman's Trojan horse stake in Allergan was laid when a former Johnson & Johnson (JNJ - Get Report) executive introduced the hedge fund manager to Valeant. The discussion between the activist and the $42 billion market cap pharmaceutical company resulted in Valeant and Pershing Square forming their joint venture fund on February 9th, according to an SEC filing.

That co-bidding arrangement came after Valeant had been trying, for about a year-and-a-half, to get Allergan to come to the table and negotiate a friendly deal, according to industry observers.

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