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Pershing's Ackman Seeks to Rally Allergan Investors

NEW YORK (TheStreet) - Bill Ackman of Pershing Square Capital Management has requested that Allergan (AGN - Get Report) give the hedge fund a record of its shareholders so that it can press a takeover offer of the company it has orchestrated with Valeant Pharmaceuticals (VRX - Get Report).

>> Read More: Allergan calls Valeant Unsustainable, Rejects $45B Offer

In filing with the Securities and Exchange Commission, Pershing demanded Allergan send over information about its shareholder base so the hedge fund could communicate with those investors about Valeant's takeover offer, which valued Allergan at about $45 billion in cash and stock when announced in late-April.

The request indicates Pershing Square and Valeant will continue to press their unsolicited offer for Allegan and came after the target rejected the cash and stock offer. It also comes as little surprise. Valeant Pharmaceuticals said on a conference call earlier in May it would seek a referendum among Allergan shareholders that might prompt the company to enter merger negotiations.

Allergan said on Monday Valeant's offer was undervalued and highlighted its belief the company's business model was unsound and presented a risk to shareholders who would be receiving the majority of prospective merger proceeds in stock.

"[Your] Proposal includes a large stock component, which we believe is a risk for Allergan stockholders due to the uncertainty surrounding Valeant's long term growth prospects and business model. Valeant's strategy runs counter to Allergan's customer focused approach," Allergan said on Monday.

"In particular, we question how Valeant would achieve the level of cost cuts it is proposing without harming the long term viability and growth trajectory of our business. For those reasons and others, we do not believe that the Valeant business model is sustainable," the company concluded.

On a Monday conference call, Allergan CEO David Pyott elaborated on the company's views of Valeant's unsustainable business model. He said Valeant, one of the most prolific acquirers in the pharmaceutical industry, is struggling to grow its business organically. Pyott also questioned the results of Valeant's R&D efforts and said it it is all but impossible to slash research budgets while growing organic revenue.

To underscore Allergan's prospects without Valeant, CEO Pyott gave investors and analysts an updated guidance for the company in 2014 and beyond.

Allergan also said on Monday it expects to increase earnings per share by 20%-to-25% generate double digit revenue growth in 2015. The company also provided guidance of double digit sales growth over the next five-years, in addition to a compound annual EPS growth rate of 20%.

Nonetheless, Allergan said it would review a revised proposal from Valeant, declining to comment on whether a potentially acceptable takeover proposal would include stock in addition to cash.

That lack of commentary indicates that in spite of a strongly-worded response from Allergan to Valeant's bid, there remains the prospect that a merger might still be negotiated.

"Given our view that this management team will always act in the interest of its shareholders, if feedback suggests that a merger with Valeant is the best path forward, then we believe that management will be open to negotiation." Sterne Agee analysts said in a Monday note.

"Most investors we have spoken to agree that there are business risks to Valeant's acquisition of Allergan and that, over the long run, Allergan is likely more valuable as an independent company," the analysts concluded.

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