Drugmaker Allergan on Monday rejected Valeant Pharmaceuticals International's $47 billion takeover offer, saying the suitor's proposed cost cuts were too steep.
Allergan, which makes popular anti-wrinkle treatment Botox, said it believed Valeant's business model was not sustainable and that the offer was too risky because of this uncertainty about the company's long-term growth.
"Valeant's model of cutting and slashing really doesn't work for more than a very short period of time," Allergan Chief Executive Officer David Pyott said during a conference call with investors to explain the move.
He said Valeant's billions of dollars in cost cuts would prevent Allergan from delivering growth that it could produce on its own, and he set a target of a 20 percent to 25 percent increase in earnings per share in 2015.
Valeant and activist investor Bill Ackman, who has a stake of almost 10 percent in Allergan, made an unsolicited cash and stock offer for the company in April.
Valeant spokeswoman Laurie Little said the company was disappointed that Allergan has rejected the offer and that it remained committed to the transaction. Ackman did not have an immediate response.
Allergan had said it was considering the offer, but within days, it adopted a so-called poison pill provision to slow a takeover. If Ackman's Pershing Capital raises its stake beyond the 10 percent threshold, other investors could buy discounted shares.
Valeant shares have risen 4 percent since announcing the offer, while Allergan shares have gained nearly 14 percent. In morning New York Stock Exchange trading, Allergan fell 1 percent, to $159.53, while Valeant was off 1.3 percent, at $129.52.
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