Botox maker Allergan on Tuesday rejected a sweetened $53 billion takeover offer from Valeant Pharmaceuticals International and activist investor William Ackman, reiterating that it undervalues the company and is too risky for shareholders.
Valeant and Pershing Square Capital Management made a joint bid for the company on April 22 that Allergan also had declined, saying that its plans to slash spending would cost the company growth. It has so far refused to enter deal discussions.
"I think from the first rejection Allergan seemed pretty set on not going forward with the deal and delaying any negotiations or shareholder vote," said Michael Waterhouse, analyst at Morningstar Research.
Ackman, who runs Pershing and has almost a 10 percent stake in Allergan, and Valeant raised their joint offer on May 28 and when investors were displeased and sold shares, added even more cash to it on May 30.
"We do not believe your latest proposal offers sufficient or certain value to warrant discussions between Allergan and Valeant," Allergan Chief Executive Officer David Pyott said in a letter to Valeant CEO Michael Pearson.
The battle could spill into 2015 as Allergan pursues other options and Valeant, according to BMO Capital Markets analyst David Maris.
"We continue to believe that Allergan has many options, including a buyback, dividend, combination with others - or even some combination of these," Maris said in a research note.
The offer, which includes $72 in cash plus 0.83 Valeant shares, is currently worth about $177 per share, or $53 billion. The deal value is calculated based on 303.5 million diluted shares outstanding as of March 31, 2014 and Ackman's holding of 28,878,638 shares.
Valeant and Ackman were not immediately available for comment.
Allergan shares rose 0.2 percent to $164.52 and Valeant shares fell 0.5 percent to $125.83 by around 10:30 a.m. ET. (Click here for the latest quote.)