Allergan's ($AGN) pulled back the veil on the restructuring it's hoping will lure
shareholders away from Valeant's ($VRX) $53 billion hostile buyout bid. Among the blueprints: laying off 1,500
employees, or 13% of its global workforce--and leaving room for some potential
acquisitions.
Those cuts--in addition to 250
vacant positions the company will shed--will help propel the company toward
$475 million in 2015 pre-tax savings, Allergan said Monday. The company also
announced second-quarter earnings of $1.40 per share--up from the $1.22 EPS it
posted in last year's Q2--and hiked earnings guidance for this year and next.
The numbers, along with
Allergan's latest cost-cutting plans, could force Valeant to up its buyout
bid--if not fend off the hostile takeover altogether. "Today's
announcement by Allergan makes it more difficult for Valeant to demonstrate how
a merger can add incremental value and Allergan shareholders may now require
Valeant to pay a greater premium for Allergan, we believe," Sterne Agee analyst
Shibani Malhotra wrote in a note to clients.
Allergan's job-cutting ax
won't fall on any "customer-facing personnel"--instead, the company
hinted that it would be R&D jobs on the chopping block. But Allergan
hastened to say that the R&D cuts wouldn't affect its hopes for new
launches. "Any reductions in discovery programs will not impact approvals
within the strategic plan period," it said in a release. Other savings
will come from spending reductions across commercial operations, general and
administrative functions, and manufacturing.
Don't rule out a buyout,
either, the company says. Its rumored target Shire ($SHPG) may have been snatched up by AbbVie ($ABBV) last week, but Allergan says it has "additional strategic
options" available, including acquisitions.
All of this--as well as the
$0.05 per share second-quarter dividend Allergan announced with its earnings
Monday--is part of its management's efforts to give shareholders "most of
what they want" in lieu of a Valeant merger, CEO David Pyott has said.
Quebec-based Valeant is rounding up support for a special shareholder meeting,
at which it hopes to oust most of Allergan's current directors and replace them
with a new, deal-happy slate.
But it seems at least one
Allergan investor may have been unimpressed with the company's planned moves. A
top Allergan shareholder, mutual fund Capital Research and Management Co.,
recently sold almost all of its Allergan holdings after meeting with Pyott, The
Wall Street Journal reports.
Meanwhile, the two sides are
still spitting fire at each another. Monday, Valeant got in touch with
regulators in both the U.S. and Canada, citing Allergan's "apparent
attempt to mislead investors and manipulate the market" with false
statements concerning Valeant's last buy, the eyecare giant Bausch + Lomb.
"We do not believe that
it is productive for either company to conduct due diligence in a public forum
and although we have consistently offered Allergan the opportunity to conduct
due diligence on our business, its management and board have refused, and have
instead chosen to make misrepresentations ... about our business," Valeant
chief J. Michael Pearson said in a statement.
But Allergan shrugged the
criticism off, standing by its prior comments. "At the end of the day,
investors will make their own decisions," it said.