(Revises deal value, adds CEO comments on stock, Morgan Stanley)
June 17 (Reuters) - Valeant Pharmaceuticals Inc said on Tuesday it will launch an exchange offer for Allergan Inc this week, allowing it to eventually take the unsolicited bid directly to shareholders.
Botox-maker Allergan has rejected Valeant's offer of cash and shares, but Valeant Chief Executive Officer Mike Pearson said he sees no reason to adjust the bid a third time. Valeant shares have lost ground for 10 straight sessions through Monday, reducing the value of its Allergan bid to about $50.8 billion from $53.8 billion on May 30.
"Hostile is not our preferred approach," Pearson said. "But this deal was so strategic and financially compelling that it really makes sense."
Valeant's stock is "artificially depressed," Pearson said, after weeks of criticism by Allergan and some analysts.
Shares of Valeant rose 0.2 percent at $118 on the New York Stock Exchange in early trading. Allergan stock was up 0.5 percent at $160.12.
Valeant held a webcast to rebut Allergan's latest criticism and clarify steps toward a hostile takeover, which could drag into 2015.
Allergan's biggest shareholder, Pershing Square Capital Management, intends to mail proxy materials as early as this month to seek a special meeting later this year to change most of Allergan's board, Valeant said.
At the same time, Pershing is suing Allergan to confirm its special meeting would not trigger the company's poison pill takeover defense.
To trigger a special meeting, Pershing needs to gain additional support of shareholders representing 15.3 percent of Allergan's ownership, topping up its own 9.7 percent stake for a total of 25 percent.
Valeant Chief Financial Officer Howard Schiller said the company is confident enough Allergan shareholders will support calling the meeting, noting that more than half of Allergan's shares have traded since word of Valeant's initial offer leaked on April 21. Hedge funds and arbitrageurs who are interested in a deal now own a large percentage of Allergan, Schiller said.
Allergan spokeswoman Bonnie Jacobs declined to comment.
Assuming Allergan shareholders remove most of the board at the meeting by the end of 2014, Valeant said holders of at least 10 percent of Allergan shares can then apply to court for another meeting to elect replacement directors, a process that could take another two months.
The new Allergan board could then negotiate a deal with Valeant and close its exchange offer.
The battle of words and presentation slides between the two companies has ranged from Valeant's acquisition-focused business model and accounting methods to Allergan's research and development costs. On Monday, the saga took a surprising twist when Allergan released private email comments it received from Morgan Stanley. The investment bank, which was pitching to advise Allergan before Valeant hired it, was quoted by Allergan calling Valeant a "house of cards."
Pearson said Allergan's move was "just a little bit of noise" and Morgan Stanley continues to advise Valeant.
BREAKINGVIEWS-Abstinent Valeant might enable Allergan deal
(Reporting by Rod Nickel in Winnipeg, Manitoba; additional reporting by Caroline Humer in New York; Editing by Jeffrey Benkoe and Sofina Mirza-Reid)