Canada's Valeant Pharmaceuticals International said on Tuesday it will not make an all-cash bid for drugmaker Allergan Inc as many had expected last week when the company said it would improve its cash and stock offer for the Botox maker.
Michael Pearson, chief executive officer of the Canadian drugmaker, said Allergan shareholders favored Valeant's bid and preferred Valeant equity over more cash.
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"We think their shareholders are convinced this is a good transaction and we have met with many, if not most of their shareholders privately and they have all told us they want this deal to be done," Pearson said on the sidelines of Valeant's annual meeting in Laval, Quebec.
"In terms of the currency, most of their shareholders would prefer to get more equity and less cash. They believe that the combination will not only create short term value in terms of the premium, but that longer term, it will continue to perform."
Valeant on April 22 offered $48.30 in cash and 0.83 of one Valeant share for each Allergan share in a massive $47 billion unsolicited bid with the support of activist investor William Ackman.
Allergan rejected the offer on May 12, citing the high stock component and steep cost-cut proposals. It said the offer was too risky due to uncertainty over long-term growth at Valeant, whose business model was unsustainable.
Valeant will announce its improved offer May 28 when it holds a meeting for shareholders of both companies to respond to Allergan's assertions.
"We want to make clear that the improved offer will not be an all-cash deal," Valeant said in a statement Tuesday.
Pearson said Valeant could not outline its new proposal earlier, but said a revised bid was best presented May 28 when addressing both sets of shareholders.
Laval, Quebec-based Valeant aims to become one of the world's top five drugmakers and has acquired about half a dozen companies in the last two years. Last year, it bought contact lens maker Bausch & Lomb Holdings for $8.7 billion, and it bought Medicis Pharmaceuticals for $2.6 billion in 2012.
Allergan has not budged since rejecting Valeant's bid and Chief Executive David Pyott urged shareholders to let the company stand alone.
Ackman, who controls a near 10 percent stake in Allergan as head of Pershing Square Capital Management, has said Pyott had a "disabling" conflict of interest as a takeover would likely mean the loss of his job.
Allergan shares were up 1.4 percent at $162 in noon trading on the New York Stock Exchange. Valeant shares rose 2.6 percent to C$141.21 on the Toronto Stock Exchange.
(Additional reporting by Esha Dey in Bangalore; Editing by Savio and Bernadette Baum)