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Valeant Plans to Improve Allergan Offer, Rally Shareholders

NEW YORK (TheStreet) - Valeant Pharmaceuticals (VRX - Get Report) said Tuesday morning it plans to improve its takeover offer for Allergan (AGN - Get Report) at the company's May 28 investor day. The move comes a day after Allergan rejected an unsolicited bid orchestrated by Valeant and hedge fund Pershing Square Capital Management, and called the company's business model unsustainable.

"[W]e plan to improve our offer for the company - to demonstrate our commitment to getting this deal done. We are prepared to pay a full and fair price, but, consistent with our track record, we will remain financially disciplined," Valeant CEO Michael Pearson said on Tuesday, in a letter to Allergan shareholders.

Pearson also addressed some of Allergan's criticism and noted that Valeant may present why its business model, is sustainable and could continue to deliver value to shareholders. "Traditionalists have questioned our operating model since we began our journey more than six years ago. We will provide further details about our operating model, business strategy, and transaction cost synergies, in addition to addressing the concerns raised yesterday by Allergan on its webcast," Pearson said.

Allergan accused Valeant of being overly austere on its research and development budget, and attempted to prove such a strategy had resulted in non-existed organic growth across the company. The company also said Valeant's recent string of acquisitions may mask poor performance from previous deals such as  a multi-billion dollar takeover of Medicis

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"Our model works, whereas Valeant's model of cutting and slashing really doesn't work for more than a very short period of time and that shows up in the same-store low growth that they produce," Allergan CEO David E. Pyott said on a Monday conference call.

Ackman Rallies Shareholders

Valeant appears to be willing to press its bid, which valued Allergan at $48.30 a share in cash and 0.83 Valeant shares, on two fronts. It seems the company may be willing to raise its offer, although the mix of cash and stock is still unclear. The cash component of Valeant's offer came to about $15.5 billion.

Meanwhile, with Bill Ackman's Pershing Square Management as a 9.7% shareholder in Allergan stock, Valeant thinks it can rally support of a takeover among the company's investor base.

"We will not stop our pursuit of this combination until we hear directly from Allerganshareholders that you prefer Allergan's "stay the course plan" to a combination with Valeant. I ask that all of you continue to provide us with your feedback," Valeant said on Tuesday.

On Monday, Pershing Square asked that Allergan disclose a host of information about its shareholder base so that the hedge fund could open a direct dialogue with investors.

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