UNITED STATES
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Allergan, Inc.
(Name of Registrant as Specified In Its Charter)
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
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ISS Presentation
Regarding the Allergan Special Meeting
November 14, 2014
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Forward-Looking Statements
This communication may contain forward-looking statements w ithin the meaning of the Private Securities Litigation Reform Act of 1995 and Canadian securities law s. These forward-looking statements include, but are not limited to, statements regarding Valeant offer to acquire Allergan, its financing of the proposed transaction, its expected future performance (including expected results of operations, financial guidance and future stock price), and the combined company’s future financial condition, operating results, strategy and plans. Forw ard-looking statements may be identified by the use of the w ords “anticipates,” “expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,”
“believes,” “estimates,” “potential,” “target,” “opportunity,” “tentative,” “positioning,” “designed,” “create,” “predict,” “ project,” “seek,” “ongoing,” “upside,” “increases” or “continue” and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results to differ materially from those described in the forward-looking statements. These assumptions, risks and uncertainties include, but are not limited to, assumptions, risks and uncertainties discussed in the company’s most recent annual or quarterly report filed w ith the SEC and the
Canadian Securities Administrators (the “CSA”) and assumptions, risks and uncertainties relating to the proposed merger, as detailed from time to time in Valeant’s filings w ith the
SEC and the CSA, w hich factors are incorporated herein by reference. Important factors that could cause actual results to differ materially from the forward-looking statements w e make in this communication are set forth in other reports or documents that w e file from time to time w ith the SEC and the CSA, and include, but are not limited to: the ultimate outcome of the offer and the second-step merger, including the ultimate removal or the failure to render inapplicable the obstacles to consummation of the offer and the second-step merger described in the offer to exchange;
the ultimate outcome and results of integrating the operations of Valeant and Allergan, the ultimate outcome of Valeant’s pricing and operating strategy applied to Allergan and the ultimate ability to realize synergies;
the effects of the proposed combination of Valeant and Allergan, including the combined company’s future financial condition, operating results, strategy and plans;
the effects of governmental regulation on our business or potential business combination transactions;
the ability to obtain regulatory approvals and meet other conditions to the offer, including the necessary shareholder approval, on a timely basis;
Valeant’s ability to sustain and grow revenues and cash flow from operations in our markets and to maintain and grow our customer base, the need for innovation and the related capital expenditures and the unpredictable economic conditions in the United States and other markets;
the impact of competition from other market participants; the development and commercialization of new products;
the availability and access, in general, of funds to meet our debt obligations prior to or w hen they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow , or (iii) access to the capital or credit markets;
our ability to comply w ith all covenants in our indentures and credit facilities, any violation of w hich, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions; and
the risks and uncertainties detailed by Allergan w ith respect to its business as described in its reports and documents filed w ith the SEC.
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this communication or to ref lect actual outcomes.
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More Information
Additional Information
This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. This communication is in connection with the exchange offer which Valeant has made to Allergan shareholders. The exchange offer is being made pursuant to a tender offer statement on Schedule TO (including the offer to exchange, the letter of election and transmittal and other related offer materials) and a registration statement on Form S-4 filed by Valeant with the SEC on June 18, 2014. These materials, as they may be amended from time to time, contain important information, including the te rms and conditions of the offer. In addition, Valeant has filed a preliminary proxy statement with the SEC on June 24, 2014 relating to a special meeting of Valeant shareholders, Pershing Square has filed a definitive proxy statement with the SEC on September 24, 2014, and Valeant and Pershing Square Capital Man agement, L.P. (“Pershing
Square”) (and, if a negotiated transaction is agreed, Allergan) may file one or more additional proxy statements or other doc uments with the SEC. This communication is not a substitute for any proxy statement, registration statement, prospectus or other document Valeant, Pers hing Square and/or Allergan have filed or may file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF VALEANT AN D ALLERGAN ARE URGED TO READ THE TENDER OFFER STATEMENT, REGISTRATION STATEMENT, AND ANY OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Definitive proxy statement(s) will be mailed to shareholders of Allergan and/or Valeant, as applicable, in connection with these matters. Investors and security holders may obtain free copies of the tender offer statement, the registration statement and other doc uments (if and when available) filed with the SEC by Valeant and/or Pershing Square through the web site maintained by the SEC at http://www.sec.gov.
Consent was not obtained or sought with respect to third party statements referenced in this presentation. The statements in this presentation regarding
Valeant’s management, business model and their potential effects on a combined business represent the opinions and beliefs of Valeant.
Information regarding the names and interests in Allergan and Valeant of Valeant and persons related to Valeant who may be de emed participants in any solicitation of Allergan or Valeant shareholders in respect of a Valeant proposal for a business combination with Allergan is available in the additional definitive proxy soliciting materials in respect of Allergan filed with the SEC by Valeant on April 21, 2014, May 28, 2014 and September 25, 2014. Information regarding the names and interests in Allergan and Valeant of Pershing Square and persons related to Pershing Square who may be deemed p articipants in any solicitation of Allergan or Valeant shareholders in respect of a Valeant proposal for a business combination with Allergan is available in additional definitive proxy soliciting material in respect of Allergan filed with the SEC by Pershing Square. The additional definitive proxy soli citing material referred to in this paragraph can be obtained free of charge from the sources indicated above.
Non-GAAP Information
To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the Company uses non-GAAP financial measures that exclude certain items. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the Company’s core operating results and trends for the periods presented. Non -GAAP financial measures are not prepared in accordance with
GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to , not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. The Company has provided preliminary results and guidance that are non-GAAP financial measures. The Company has not provided a reconciliation of these preliminary and forward -looking non-GAAP financial measures due to the difficulty in forecasting and quantifying the exact amount of the items excluded from the non -GAAP financial measures that will be included in the comparable GAAP financial measures. Reconciliations of historical non-GAAP financials can be found at www.valeant.com Note 1: The guidance in this presentation is only effective as of the date given, November 14, 2014, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance
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Agenda
I. Executive Summary
II. Overview of Compelling Transaction
III. Allergan’s Board Clearly and Consistently Failing Shareholders
IV. Update on Valeant
V. Objectives of Special Meeting
VI. Conclusion
VII. Appendix
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I. EXECUTIVE SUMMARY
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Executive Summary
Valeant has made a highly compelling proposal for the acquisition of Allergan
Valeant’s current offer provides a significant 55% premium to the unadjusted Allergan share price
We calculate the fair value(3) of the combined company at a 114% premium to the unaffected Allergan share price
Valeant improved its proposal following direct feedback from the Allergan shareholders and has stated its willingness to
further improve its offer and provide look-through value of at least $200 per share to the Allergan shareholders
Valeant’s offer provides for ~$20.00(1) in 2016 EPS per Allergan share vs. ~$10.25(2) in 2016 EPS for standalone Allergan
The successful B+L acquisition and integration provides a blueprint for Allergan
Allergan?s Board has been unwilling to engage with Valeant and act in shareholders? best interests
Repeatedly refused to educate themselves on Valeant’s business model and prospects, despite numerous invitations from
Valeant to come to the table
Instead, Allergan has violated many governance best practices and invested time and shareholder capital to launch a
“scorched earth” campaign making false and misleading attacks on Valeant’s business model and accounting practices,
which have been refuted and proven false
False and misleading attacks on Valeant’s business have been destructive to Allergan shareholders by damaging the
Valeant stock price and thus the potential value of a transaction
Valeant?s operating model continues to perform at high levels
Valeant delivered exceptional results for the third quarter and exceeded expectations on all key metrics
Total organic growth for the third quarter was 19%, with Bausch + Lomb organic growth of 12%
Q4 2014 Cash EPS guidance raised and 2015 outlook raised
Majority of Allergan?s board must be removed, and “ horse choking” bylaws overturned for the Allergan board to act in
the
best interests of Allergan shareholders
The new Allergan Board will not be obligated to pursue a transaction with Valeant, but will be able to objectively and
independently evaluate our offer relative to other alternatives and, if they so choose, negotiate with us to reach mutual
agreement
Recent amendments have been made begrudgingly and problematic lead director remains with expanded role
In all likelihood if we are not successful in removing a majority of Allergan?s current Board we will retract our offer
(1) Based on 2016 PF EPS of $14.14 x 1.38 exchange ratio; Assumes reinv estment of $72 in cash in Valeant stock at $131 / share as of Nov ember 12,
2014
(2) Based on Allergan guidance of $10.25 as of 10/9/14
(3) See slide 16
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II. VALEANT?S COMPELLING OFFER
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Compelling strategic & financial transaction for Allergan
shareholders
Sustainable long-term value to shareholders
Unrivaled portfolio in Ophthalmology, Dermatology, Aesthetics, and Neurology
Robust combined company new product pipeline
Valeant strength in emerging markets will accelerate Allergan growth ex -U.S., as seen in Bausch & Lomb
$2.7Bn+ in annual operating cost synergies and additional significant revenue and tax synergies, supporting meaningful earnin gs
accretion
Valeant intends to initiate $0.20 / share annual dividend – equal to current Allergan dividend
Compelling premium vs. standalone valuation
Allergan standalone share price was ~$110 at beginning of 2014, and most objective metrics (1) would imply standalone share price $150
or below based on actions to date
At current offer, each Allergan share receives $72 in cash and 0.83 Valeant shares with the ability to elect all cash or all stock subject to
proration
Valeant current offer reflects at least 55% premium to the unaffected stock price and an implied EBITDA multiple of
approximately 20x (2)
Due to Allergan’s negative campaign, Valeant stock price is undervalued2, and we believe the value of the offer will increase as
certainty of transaction increases, with a potential closing see through price of ~$250 per Allergan share
We calculate the fair value(4) of the combined company at a 114% premium to the unaffected share price and an implied
EBITDA multiple of approximately 29x (3)
Allergan ownership of 44% in the combined company provides opportunity to participate in significant upside of combined company
Allergan?s largest shareholder, Pershing Square, has elected to take all stock – at a substantial discount based on current prices
Pershing Square is confident in our currency and the value of the combined entity and is betting that stock goes to $180+ per share post
closing of the transaction
Allows Valeant to offer more cash to Allergan shareholders
No substantive hurdles to closing
No financing contingency; committed financing in place
Valeant will accept antitrust risk; Valeant has already divested aesthetics business
All other conditions are customary and should easily be satisfied
(1) See analysis on page 21
(2) Based on current equity analyst consensus
(3) Based on Valeant share price of $120.21 as of close on 17 October 2014; Allergan unaffected share price of $116.63 as of 10 April 2014, the day before Pershing Square crossed the 5% Schedule 13D ownership level (4) See slide 16
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Valeant + Allergan, An unrivaled platform for growth and
value creation in healthcare
Valeant +Allergan 2014E rev
5 year market growth rate
Ophthalmology
~$3.8B 6-7%
Consumer
~$1.3B 6-7%
Dermatology Rx
~$1.5B 6-7%
Neurology/Dental/Other
~$2.8B 4-6%
Aesthetics
~$2.4B 11-12%
Emerging Markets
~$3.8B 10-13%
Source: IMS, EvaluatePharma
Note: Therapeutic area revenue estimates exclude revenue from emerging markets 9
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B+L one year anniversary(1) update – blueprint for Allergan
Accelerated organic growth from <5% pre acquisition to 10% since acquisition (adjusted only for FX)
Continued strength of pharma
Turnaround for lens and surgical
Increased scale of combined Valeant and B+L consumer business has accelerated growth
Benefit from Valeant’s decentralized approach
Valeant’s emerging market capabilities have accelerated B+L’s emerging market growth
Successful recent product launches; limited contribution to date, will be growth drivers in future
Bausch + Lomb Ultra ? Victus
BioTrue ONEday for Presbyopia ? Trulign
PureVision 2 for Presbyopia ? enVista BLIS™ lens inserter
Peroxiclear ? Soothe XP
Expanded B+L current and future portfolio with new pipeline products and tuck-in acquisitions (e.g., Croma, Bescon)
On track to achieve at least $900 million in B + L synergies
~$800 million annualized run rate realized by Q3 14
Remainder of synergies expected to be achieved by end of 2015
Primarily related to manufacturing, Europe and small amounts from a number of other areas
Cost to achieve synergies expected to be ~$600M
Great people added at all levels to our organization
(1) B+L acquisition closed August 5th 2013 10
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Bausch + Lomb 2014 Run Rate Savings
$ Millions
Combined Exit run-rate Exit run rate as a
Team baseline savings percent of baseline
US Corporate 339 145 43%
US Commercial 727 154 21%
LatAm 187 60 32%
Canada 100 23 23%
Asia 352 85 24%
Europe 611 198 32%
Global R&D 309 176 57%
Quality 39 5 13%
Ops / Supply Chain 2,226 59 3%
Total 4,890 904 18%
Note: original synergy announcement of $800M in synergies, subsequently raised to $900M
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Opportunity to drive significant value from synergies
Cost synergy opportunity of $2.7 billion (inclusive of announced $475 of Allergan standalone synergies) + tax + revenue synergy
Value Source of Synergy
Corporate Spending
Rationalize duplicative public company costs
Rationalize global sales & marketing across businesses (e.g., Dermatology, Aesthetics,
Neurology)
Leverage combined commercial support functions
Leverage size on purchasing/contracts + rationalize corporate HQ/duplicative facilities
~$1,800 million Regional Spending
SG&A Synergies(40% reduction of Rationalize regional marketing across businesses (e.g., Dermatology, Aesthetics,
combined SG&A) Neurology)
Rationalize regional functions (e.g., R&D, Finance, IT)
Rationalize regional facilities and leadership
Country/BU
Rationalize commercial organization overlap/ leverage sales infrastructure
Reduce spending on 3rd parties
Re-evaluate ROI on all promotional spending
Apply Valeant approach to on-going R&D
? Focus on output not input and target low-risk projects
~$900 million
? Outsource commodity functions
R&D Cost Synergy
(69% reduction of Continue high-probability programs such as line extensions
combined R&D)
Continue to in-license late stage/launch products (e.g. Emerade, Neotensil, Luzu)
Rationalize core R+D infrastructure
Tax Synergy Combined high single-digit tax rate
Acceleration of Allergan in emerging markets
Acceleration of Allergan OTC
Revenue Synergy
Acceleration of Valeant Aesthetic assets US and ex-US
Additional product growth opportunities
Valeant has a proven track record in achieving or surpassing announced synergies
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Expected Savings Are In Line With Precedent MOE Transactions
Combined OpEx($M) Synergies($M) Synergies / OpEx
Biovail 667 350 ~52%
Bausch 2,625 900 ~34%
+Lomb
Allergan 5,800 2,700(1) ~47%
(1) Inclusive of $475m of announced Allegan standalone synergies
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Valeant’s Execution Track Record
Valeant Management Team Performance*
USD
$140
$120
$100
$80
$60
$40
$20
$0
1-Feb-08 1-Feb-09 1-Feb-10 1-Feb-11 1-Feb-12 1-Feb-13 1-Feb-14
VRX
>2,000% price adjusted increase in VRX share price (Feb 2008 to today)
Consistently exceeded expectations
*Adjusted for Valeant/Biovail merger.
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Valeant stock is undervalued
Stock has traded at artificially low levels due to Allergan’s series of false and
misleading attacks along with deal dynamics (i.e. short sellers)
Recent management guidance supports strong growth:
2015 growth of 11% top-line
organic growth and 21% bottom-line without benefit
of acquisitions
2016 growth of 9%+ top-line
organic growth and 21%+ bottom-line without
benefit of acquisitions
Capital deployment provides for further upside from management guidance (e.g.,
share buybacks, business development)
Valeant is currently trading at 13x 2015 EPS despite strong historical performance
and strong growth prospects
Peer group(1) average ~19x 2015 EPS
Current internal cash-flow model suggests we are significantly undervalued
(1) Peer Group per Valeant?s Company Filings ( Actavis, Biogen, Perrigo, Mylan, Celgene, Gilead, Amgen,
Bristol Myers Squibb, Shire, Allergan, Danaher, Eli Lilly).
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Understanding the value of the Pro Forma company
Valeant Projections
VRX AGN(1) Deal Value(2) Total
2016 net
Income: $4.1B $2.7B $1.7B $8.56B
Shares Outstanding (M) 605.4
2016 EPS $14.14
Blended trading multiple(3) 16.8x
Valeant stock price $238
Discounted Valeant stock price(4) $214
Implied Allergan shareholder price(5) $250
Premium vs. unaffected price(6) 114%
(1) Includes Allergan announced synergies
(2) Realized synergies including tax, net of incremental interest expense
(3) Based on the unaffected prices as of April 10th, 2014 the day before Pershing Square crossed the 5% Schedule 13D ow nership level and
commenced its rapid accumulation program
(4) Discounted at 1-year at illustrative cost of equity of 10%
(5) Valeant stock price x 0.83 exchange ratio + $72 per share
(6) $117 16
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Valeant’s offer provides a significant premium to Allergan shareholders with material upside given Valeant is currently undervalued
Current offer of .83 Valeant shares for each Allergan share and $72 in cash
Valeant’s share price is currently undervalued, causing current look-through package value to be artificially low Material upside potential for Allergan shareholders as Valeant price appreciates in addition to value created from the combination
Package Value per Allergan Share
$295
$250
$180
Look-through value at Fair-value based on blended unaffected Fair-value assuming reinvestment of
current Valeant price ($131)(1) P/E multiple(2) cash proceeds based on blended
unaffected P/E multiple (3)
Premium to
Unaffected (4): 55% 114% 153%
Notes
(1) Valeant closing share price as of November 12, 2014
(2) Based on 2016 PF EPS of $14.14 x blended unaffected NTM P/E multiple of 16.8x (discounted by 1-year at illustrative cost of equity of 10%) x 0.83 exchange ratio + $72 in cash
(3) Based on 2016 PF EPS of $14.14 x blended unaffected NTM P/E multiple of 16.8x (discounted by 1-year at illustrative cost of equity of 10%) x 1.38 exchange ratio; Assumes reinvestment of $72 in cash in Valeant stock at $131 / share as of November 12, 2014 (4) Allergan unaffected share price of $116.63 as of April 10, 2014, the day before Pershing Square crossed the 5% Schedule 13D o wnership level
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Compelling proposal relative to customary valuation benchmarks
Premium to Unaffected Trading Price (1)
153%
114%
55%
26%
Median Premium Look-through value at Fair-value based on Fair-value assuming
Paid in US M&A current Valeant price blended unaffected P/E reinvestment of cash
Transactions($131)(3) multiple (4) proceeds based on
During Last blended unaffected P/E
Twelve Months multiple (5)
($1Bn and Higher) (2)
AV / LTM EBITDA Acquisition Multiples (6)
33.6x
28.7x
20.3x
15.0x
Median for Look-through value at Fair-value based on Fair-value assuming
Precedent Selected current Valeant price blended unaffected reinvestment of cash
Pharmaceutical($131)(3) P/E multiple (4) proceeds based on
Transactions blended unaffected
P/E multiple (5)
Notes
(1) Allergan unaffected share price of $116.63 as of April 10, 2014, the day before Pershing Square crossed the 5% Schedule 13D o wnership level
(2) Thomson Reuters Database. Median premium paid to target?s unaffected trading price 1-day prior to announcement or event. Based on transactions announced in last 12 months, where transaction value was above $1Bn and cash was included in the deal (3) Valeant closing share price as of November 12, 2014 (4) Based on 2016 PF EPS of $14.14 x blended unaffected NTM P/E multiple of 16.8x (discounted by 1-year at illustrative cost of equity of 10%) x 0.83 exchange ratio + $72 in cash (5) Based on 2016 PF EPS of $14.14 x blended unaffected NTM P/E multiple of 16.8x (discounted by 1-year at illustrative cost of equity of 10%) x 1.38 exchange ratio; Assumes reinvestment of $72 in cash in Valeant stock at $131 / share as of November 12, 2014 (6) Allergan September 30, 2014 LTM EBITDA of $2.6Bn per company filings; defined as non-GAAP operating income plus depreciation; net debt & MI per September 30, 2014 Allergan company filings. This value is for illustrative purposes only and is not a prediction of a future trading price; the actual future trading price may be higher or lower
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Allergan shareholders will receive almost twice as much EPS in a combination with Valeant than on a standalone basis . . .
% Accretion from 0.83
Allergan EPS exchange and cash re-
investment
2013 EPS $4.77 309%
2016 EPS—Research Models as of 4/21/14 (1) $7.27 168%
2016 EPS – Allergan Guidance (2) $10.25 90%
2016 EPS – 0.83 Exchange and Cash
Reinvestment (3) ~$20
Allergan shareholders will receive ~$20 (3) of combined company 2016 EPS
vs ~$10 (2) standalone Allergan EPS
Notes
(1) Based on Goldman Sachs, Bank of America and Bank of Montreal earnings models as of April 21, 2014 (2) Based on Allergan guidance as of October 09, 2014
(3) Based on 2016 PF EPS of $14.14 x 1.38 exchange ratio; Assumes reinvestment of $72 in cash in Valeant stock at $131 / share as of November 12, 2014
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Even Allergan?s CEO has admitted Allergan?s stock was fairly valued at $123 per share in February
Q – “So my question to you is: As of this February 12, 2014 time period when you sold your stock for $123, 252,000 shares, did you believe that the price of $123 massively undervalued the value of your stock?”
David Pyott – “On that day, I believe the stock was fairly valued” (1)
Notes
(1) David Pyott deposition, page 34
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Absent our proposal, Allergan’s stock would be trading significantly below current levels
Fair Value of Pro Forma Combined Company—$250 per share (1)
Current Look-Through Value—$ 180 per share
$ 154 $153 $ 166 $157
$133 $ 140
$131 $ 130 $ 143 $ 134
$110 $117
Stock Price on First AGN Unaffected AGN Unaffected Illustrative AGN Illustrative AGN Illustrative AGN Price
Trading Day of 2014 (2) Share Price (3) All-Time Price Price Adjusted Adjusted for S&P
Trading High (4) Adjusted for S&P 500 for Proxy 1500 Pharma
Return (5) Peers Return(6) Index Return (7)
Notes
(1) Based on 2016 PF EPS of $14.14 x blended unaffected NTM P/E multiple of 16.8x (discounted by 1-year at illustrativ e cost of equity of 10% ) x 0.83 exchange ratio + $72 in cash
(2) AGN share price as of January 2, 2014
(3) Unaffected share price as of April 10, 2014, the day before Pershing Square crossed the 5% schedule 13D ownership lev el
(4) Per Bloomberg; March 19, 2014
(5) AGN share price on April 10, 2014 adj usted for S&P 500 performance through to Nov ember 12, 2014
(6) AGN share price on April 10, 2014 through to Nov ember 12, 2014 adj usted for peers from AGN proxy statement dated March 26, 2014. Proxy peers exclude Forest Laboratories due
to acquisition of Actav is on July 1, 2014
(7) AGN share price on April 10, 2014 adj usted for S&P 1500 Pharmaceuticals Index performance through to Nov ember 12, 2014
(8) Illustrativ e realized synergies assumed to add per share AGN v alue equiv alent to [$475MM x (1 –tax rate) x prior 1 year av erage to unaffected date consensus NTM EPS multiple of
~20x] / share count
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$23 per share credit for AGN announced cost savings (8)
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III. ALLERGAN?S UNWILLINGNESS TO ENGAGE
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Allergan’s Board has been unwilling to act in shareholders’ best interests
Allergan shareholders have voiced significant support for our compelling offer during our extensive outreach over the past 7 months
Meanwhile, in these 7 months Allergan?s Board has consistently taken actions to frustrate and prevent shareholders from being able to benefit from our compelling offer ? Obstructing shareholder rights
Immediately adopted a poison pill with 10% trigger
Maintained onerous bylaw provisions in an attempt to prevent shareholders from calling a special meeting
Recent amendments have only been made after being sued in Delaware and vociferous shareholder outrage Carried out a multi-front, multi-venue litigation to prevent the special meeting and nullify the will of investors Even after Allergan investors holding 39% of outstanding shares requested a special meeting, it was only after a
Delaware judge called Allergan’s bylaws “horse choking” that the Board unconditionally agreed to hold a Special
Meeting
Attempting to thwart our offer by attacking our business and pursuing value destructive acquisitions
Pursuing “scorched earth” tactics regarding Valeant’s business model, including hiring consultants to disparage Valeant’s model, without ever asking for or conducting due diligence on Valeant Management directly soliciting Valeant shareholders in an attempt to drive Valeant’s stock price down
Management soliciting physicians to spread false and misleading claims and attempt to damage relationships Pursuing a large acquisition that would not require shareholder approval in an effort to thwart Valeant’s offer
Refusing to engage at all despite clear interest of shareholders
Refused to allow independent directors of Allergan to independently evaluate the offer or independently engage with Valeant or shareholders on the topic ? Still refusing to engage despite clear statements by Valeant that if they were allowed to engage with Allergan and conduct due diligence, Valeant would be prepared to consider increasing the value of the offer
During this time, many long-term Allergan shareholders, including its largest shareholder, have sold their shares because this was the only way to take advantage of the value of Valeant?s offer
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Instead, Allergan has chosen to attack our business with false and misleading claims
Assertions Facts
Questioned sustainability of Valeant?s business model As expected Valeant’s organic sales growth has
without understanding the business (May 27, 2014) accelerated, delivering 19% organic growth in 3Q 2014
Asserted that Valeant?s business model relies on serial Valeant has a strong pipeline of launches:
acquisitions and cost reductions, and not on top -line In 2014 Valeant is launching 20 new products in the
revenue growth and operational excellence (June 10, U.S. and over 300 products in the Emerging Markets
2014) Valeant has achieved these results without a major
acquisition since B+L in August 2013
Allergan declared “Bausch & Lomb?s outlook is poor” B&L growth was <5% pre-acquisition
(June 10, 2014) B&L growth has accelerated since acquisition with 10%+
organic growth each quarter due to our strong
management team and decentralized operating model
Recent and future product launches will be significant
value drives in the future
Proclaims Valeant needs to complete Allergan Valeant’s businesses clearly outperformed in Q3 2014, the
transaction, or another significant transaction, to quarter Allegan pointed to as a defining quarter following
support its current stock price (June 10, 2014) the anniversary of the Bausch + Lomb transaction
We expect organic growth to be greater than 10% for at
least the next year
Following preannouncement of strong results for Q3 Q3’13 in-line with historical contribution of Q3 and
2014, Allergan then moved the goal posts (September impacted by strong Q3 2012
29, 2014): Q4’14 YOY growth will be against a more difficult
Alleged that Q3’14 growth was positively affected by a comparable (Q4’13)
weak Q3’13 (B+L acquisition on August 6, 2013) Allergan’s analysis was simply an attempt to take away
Q4’14 YOY growth will be against a more difficult from a terrific quarter
comparable (Q4’13)
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IV. VALEANT?S STRONG OPERATING MODEL
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Valeant’s 3Q 2014 results highlight continued strength in
business model
Exceptional Results
2014 3Q total revenue $2.1Bn, an increase of 33% over the prior year
Overall organic growth of 19%; Bausch + Lomb 12% beating guidance
19 of the top 20 products grew in Q3 2014 over Q3 2013
Cash EPS of $2.11, an increase of 47% over the prior year
Adjusted Cash Flow from Operations of $771M, an increase of 89% over the prior year
GAAP Cash Flow from Operations of $619M, an increase of 206% over the prior year
Restructuring & integration costs declined 56% Q3 2014 compared to Q2 2014 to $63M
Highlights of the Third Quarter
Almost every business unit operated at or above trend -line levels
Launched 17 new products in U.S. year-to-date
Closed 5 acquisitions since Q2
Bausch + Lomb
Exceptional organic growth from <5% pre-acquisition to 10% since acquisition (excl. adjustments)
8 successful product launches that are expected to be future growth drivers
On track to achieve at least $900M of synergies
Raised 2014 and 2015 Expectations
Adjusted 2014 Full Year Guidance to reflect outperformance in Q3
Revenues: from $8.0B-$8.3B to $8.1B—$8.3B
Cash EPS: from $7.90—$8.10 to $8.22—$8.32
Adjusted Cash Flow from Operations: from $2.3B—$2.6B to greater than $2.5B (expect at least 90% cash
conversion for full year 2014)
Raised 2015 outlook and increased confidence in ability to exceed 2015 and 2016 outlook
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Q3 U.S. Business Highlights (1/3)
Dermatology, $273M Revenues, 33% Q/Q Growth
Strong growth for promoted brands, e.g. Solodyn, Elidel, Acanya®, Zyclara®
After only three months, Jublia has 7% TRx share of total onychomycosis market
Luzu TRx uptake continues to accelerate with 13% share of branded topical antifungal market
Includes PreCision since acquisition closed on July 7 Consumer, $141M Revenues, 43% Q/Q Growth
One of the fastest growing OTC Health Care company in the US (September YTD)(a) ? CeraVe—fastest growing (Major) skin care brand(a)
PreserVision AREDS 2—#1 selling Vitamin over last 12 weeks(1) Entire PreserVision brand grew 20% Q/Q based on consumption(1)
BioTrue Multipurpose Solution—Fastest growing Lens Care brand(1)
(1) Source: IRI consumption data.
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Q3 U.S. Business Highlights (2/3)
Ophthalmology Rx, $118M Revenues, 57% Q/Q Growth
Strong performance of Anti-infective/Anti-viral portfolio – Besivance®, Zylet®, Zirgan® ? Continued Q/Q organic growth from Prolensa +11% and Lotemax Franchise +13%
Contact Lenses, $45M Revenues, 82% Q/Q Growth
Fastest growing contact lens business – market share expanded from 7% to over 10% since B+L acquisition(1)
BioTrue ONEday and PureVision® 2 for Presbyopia exceeding expectations and capturing market share; current growth doesn’t reflect upside in Bausch + Lomb Ultra ® given limited distribution (less than $5M of revenues in Q3 2014)
(1) Source: Independent third party data.
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Q3 U.S. Business Highlights (3/3)
Surgical, $54M Revenues, 74% Q/Q Growth
Greater than 55% growth for the cataract refractive lens business ? Greater than 40% growth for Stellaris® and Stellaris PC
Number two player in the Posterior Chamber IOL market(1)
28 Victus® machines expected to be installed in 2014 in the U.S., compared with 14 installed in 2013
Neuro & Other/Generics, $392M Revenues, 40% Q/Q Growth
Neuro growth driven by promoted brands – Xenazine, Wellbutrin XL® and Syprine/Cuprimine® ? Continued growth of generics through portfolio expansion and due to competitor stock outs
Dental, $32M Revenues, 20% Q/Q Growth
Growth driven by new customers and strong early performance of launch products (e.g. Onset)
Aesthetics, $32M Revenues(2)
Improved sales force effectiveness resulted in 21% Q/Q organic growth for Obagi
(1) Source: Market Scope, an ophthalmic market research firm, based on data as of Q2 2014. (2) No injectables revenues in Q3 2014.
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Q3 Rest of World Business Highlights
Emerging Markets-Europe/Middle East, $279M Revenues, 36% Q/Q Growth
Strong performance across all regions even with significant FX headwinds
FX impacts on European Emerging Markets ~ $(18M) Revenues (relative to 7/31 Guidance) ? Q/Q organic growth in Russia, Ukraine and CIS of ~20%
Emerging Markets-Asia/Africa, $155M Revenues, 66% Q/Q Growth
China organic growth of 11% driven primarily by lens franchise ? iNova South-East Asia business organic growth of 18% Q/Q
Emerging Markets-Latin America, $114M Revenues, 13% Q/Q Growth
Strong performance in Mexico of 12% organic growth, following resolution of supply issues ? Brazil and Argentina impacted by economic slowdown and import restrictions in Argentina ? Export business negatively impacted by capital controls in Venezuela
ROW Developed, $421M Revenues, 29% Q/Q Growth
Australian organic growth of 15% due to strong cough & cold season ? Japanese lens care is gaining market share ? Continued mid-single digit organic growth in Western Europe
Offset by a decline in Canada largely due to genericization of Wellbutrin® XL and FX impact
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Valeant Standalone Projections (1/2)
We reviewed two cases: 1) Debt Repayment and 2) Acquisition
1) Debt Repayment Case:
2015/2016 high single-digit / low double-digit organic growth Cash EPS growth of >20% in 2015 and 2016 90% of free cash flow used to pay down debt Leverage decreases to 2.7x in 2015 and 1.8x in 2016
2) Acquisition Case:
Assumes acquisitions of ~$6B in 2015, ~$11B in 2016 Leverage stays at ~4.0x or below Businesses acquired at ~3.0x sales, mid-year Cash EPS growth of ~30% in 2015 and > 35% in 2016
Below shows the midpoint of the two cases
Midpoint Midpoint
2013 2014 2015 2016
Revenue ~$8.2B ~$9.6B ~$12.0B
$ 5.8B
Growth 41% 17% 25%
Cash EPS $6.24 ~$8.27 ~$10.35 ~$13.30
Growth 33% 25% 29%
Adj. Cash Flow from $ 1.8B ~$2.5B ~$3.2B ~$4.2B
Operations
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Valeant Standalone Projections (2/2)
2013 2014 2015 2016
Debt Repayment Case
Revenue $5.8B ~$8.2B ~$9.1B ~$9.9B
Growth 41% 11% 9%
Cash EPS $6.24 ~$8.27 ~$10.00 ~$12.05
Growth 33% 21% 21%
Adj. Cash Flow from $1.8B ~$2.5B ~$3.1B ~$3.8B
Operations
Net Debt $17.0B ~$15.4B ~$12.9B ~$9.4B
Acquisition Case
Acquisitions ~$6.3B ~$11.3B
Revenue ~$8.2B ~$10.1B ~$14.0B
$5.8B
Growth 41% 23% 39%
Cash EPS $6.24 ~$8.27 ~$10.70 ~$14.50
Growth 33% 29% 36%
Adj. Cash Flow from $1.8B ~$2.5B ~$3.2B ~$4.5B
Operations
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Outlook for 2015 and 2016 (1/4)
Projected
Projected Organic Growth
2015 / 2016 Assumptions
Revenue
2015 (%)
2016 (%)
2014 ($
M)
United States
Dermatology
~ $1030
~ 25-30%
~ 15-20%
Base business ~5% growth
New/recent product launches:
Jublia: 2015 ($225M), 2016 ($400M)
Luzu, Onexton, RAM .08%: 2015
($85M), 2016 ($145M)
Generic impacts:
Targretin generic enters mid 2015
Carac generic enters Q4 2014
Ziana generic enters mid 2016
Not included in 2016 forecast:
IDP-118 (up to ~$100M) for psoriasis
Consumer
~
$
590
~
10%
~
10%
Consistent with 2014 growth
Opthalmology Rx
~
$
450
~
10%
~
20%
2015
and 2016 base business consistent
with 2014 growth
2016
incremental growth reflects launch of
Brimonidine ($50-75M)
Not included in 2016 forecast:
Latanoprostene bunod (up to~$100M)
Includes impact of expected generics; assumes no acquisitions
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Outlook for 2015 and 2016 (2/4)
Projected Projected Organic Growth 2015 / 2016 Assumptions
Revenue 2015 (%) 2016 (%)
2014 ($ M)
United States
Contact Lenses ~ $ 175 ~ 20% ~ 20% Benefit of additional Ultra lines in 2015
and 2016 accelerates organic growth
Surgical ~ $ 225 ~ 10% ~ 10% Growth consistent with 2014
Continued growth of premium IOLs
Neuro & Other / ~ $1,510 ~ 5% ~ 5% Growth reflects genericization of
Generics Xenazine
Dental ~ $ 135 ~ 15% ~ 10% Above trend line growth in 2015 due to
recent sales force expansion
Trend line growth in 2016
Aesthetics ~ $ 160 ~ 5-10% ~ 5-10% Market growth
Includes impact of expected generics; assumes no acquisitions
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Outlook for 2015 and 2016 (3/4)
Projected Projected Organic 2015 / 2016 Assumptions
Revenue Growth
2014 ($M)* 2015 (%) 2016 (%)
Other Developed
Western Europe
Western Europe/Japan
Current growth trends
Japan
~$1,725 ~3-5% ~3-5%
Australia Australia/Canada
Return to historic growth trend pre-
Canada generic impact
Emerging Markets
EMENA ~ $1,100 ~8-10% ~8-10
Asia / South Reflects history and expected 2014
~$575 ~10-15% ~10-15%
Africa growth
Latin America ~$450 ~6-8% ~6-8%
Includes impact of expected generics; assumes no acquisitions
* Includes latest Fx estimates 35
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Outlook for 2015 and 2016 (4/4)
Gross Margin
75% 2015 Reflects impact of cost
76% 2016 improvement initiatives, improved mix and declining Xenazine revenue
SG&A
2015: 23-24% as percentage of revenue, declining in 2016
R&D
~$200—250M annual spend
Cash Taxes
5 – 6% Adjusted Net Income
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Q4 business updates
Valeant is on track to deliver another strong quarter with strength in the U.S. business off-setting FX headwinds ex-U.S.
Dermatology:
Jublia: 7,400 TRx/week as of the week ended October 31st – note this is before the launch of our DTC TV advertising campaign
Key promoted brands including: Solodyn, Luzu, Zyclara, Elidel, Acanya, and Ziana continue to perform and are ahead of Q4 forecast
Onexton PDUFA date November 30, 2014
B+L:
On-track for double-digit growth with strong performance across Rx Pharmaceutical, Consumer, Surgical, Contact Lens, and Emerging Market businesses
Ex-US:
Continued strong organic growth partially offset by FX headwinds
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Valeant’s decentralized model has delivered strong organic
growth performance
Valeant?s Strategy & Operating Model Proof Points
Great people who care about patients and doctors ~ 2,000%+ price adjusted increase in Valeant
Decisions made closer to the customer rather than share price since 2008 (1)
by centralized functions Organic growth of 7% on average since 2010
A different operating model: Aggregate growth of 49% in emerging markets
Committed to R&D, focused on “outputs” not from 2011-2013
“inputs” 19 new product launches in 2014 – significantly
Lean cost structure more than our competitors and Allergan
Decentralized organization Maintained or accelerated revenue growth for
“International” not “global” every platform acquisition
Durable products Bausch + Lomb’s organic growth has
accelerated from 4% to 10%+ since acquisition,
High-growth markets almost exclusively through volume growth
Therapeutic areas/geographies where Attractive product and payor mix (85% durable
physician-patient relationships matter products portfolio; 75% cash/privately
Capital allocation decisions through reimbursed)
shareholder filter
Relentless focus on organic growth and creating
shareholder value
Shareholder friendly governance and
compensation program
Major institutional shareholder on the board
(ValueAct)
Stock based compensation tied to multi-year
returns in excess of cost of equity
Note
(1) Total return analysis per Bloomberg based on a start date of 2 January 2008 to unaffected share prices of Valeant as of 10 April 2014 the day before Pershing
Square crossed the 5% schedule 13D ownership level 38
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A combination between Valeant and Allergan will improve
R&D productivity, driving superior patient outcomes
Despite its assertions, Allergan?s innovation track record validates Valeant?s model
Q: “What new products
80% of Allergan revenue derived from externally-developed innovation has Allergan discovered in
its labs since you became
Allergan’s late-stage internal pipeline >50% focused on new indications, geographies and CEO”
reformulations for existing products – e.g. new Botox indications, Restasis EU approval and
reformulation, and Aczone next generation David Pyott: “If you go down
to, all the way to the active
Allergan?s recently announced R&D cost-reduction plan attempts to apply core pharmaceutical ingredient,
Valeant principles the answer is zero.”(2)
Refocus on areas with strategic fit (“core areas of expertise”) and highest value opportunities
Reduce investment in high risk, early-stage, pre-clinical and/or non-core projects
Valeant?s approach to acquired R&D will ensure proper allocation
of capital and a higher degree of success for Allergan programs Valeant Acquired
Valeant has never stopped an acquired program mid clinical study R&D Outcomes (1)
Conducts rigorous, unbiased peer scientific review to categorize programs
Invest: high potential with strategic fit No
External
Partner: higher risk and/or lacking strategic fit Interest
Termination only occurs if program fails to demonstrate clinical viability 25% Invest
OR no external parties are interested in partnering Partner 65%
10%
75% of acquired projects receive further Valeant investment (65%)
or are partnered externally (10%)
Allergan has publicly criticized Valeant’s R&D strategy, while at the same time adopting a similar strategy
Notes
(1) Outcomes of R&D acquired by Valeant in the Dow, Biovail, Medicis, and Bausch & Lomb transactions; total of 142 programs in the acquired portfolios
(2) Davis Pyott deposition pages 141 and 142
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new product launches in 2014
Key 2014 Launches
Jublia Ultra
Luzu Biotrue Multi Focal
Retin-A Micro .08 Soothe XP
Onexton Trulign
PureVision 2 Multi Peroxiclear Focal CeraVe Baby
Victus Fragmentation
Onset
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Valeant late stage R&D portfolio
Product Category Description Expected launch year
Cataract and refractory surgical
Cirle 3D Navigation Eye Health 2015
navigations
EnVista Toric Eye Health Toric IOL 2015/2016
Brimonidine Eye Health Eye Whitening OTC 2016
Vesneo Eye Health Glaucoma 2016
Post-Operative Inflammation and
Lotemax Gel Nex Gen (.38) Eye Health 2016
Pain
Ultra Multi Focal, Toric, and Plus
Powers Eye Health Contact Lens 2015/2016
IDP-118 Derm Psoriasis 2017
Emerade Allergy Anaphylaxis 2016
Gummy formulation of leading
Ocuvite Gummy Consumer 2015
vitamin
CeraVe Consumer Cleansing bar 2015
SA Cleanser, Baby Cream, Baby
CeraVe Consumer Sunscreen SPF 45, Night 2015-2016
Cream, Anti-Itch
Source: Valeant management estimates 41
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V. WHY SUCCESS AT THE SPECIAL MEETING IS IMPERATIVE
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Approval of the Pershing Square proposals will facilitate a value maximizing transaction and hold directors accountable
Proposals are prudent in light of Allergan Board?s track record of ignoring or obstructing shareholders and will result in an independent Board that will act in the best interests of shareholders
Removal of 6 of 9 of the incumbent directors of Allergan Recommendation of a slate of new independent directors
Encourage the independent Board to engage in discussions with Valeant regarding current offer without limiting its ability to engage with other parties Make significant corporate governance improvements, including those relating to the onerous special meeting bylaw provisions and preventing the current incumbents from unilaterally adopting new bylaws to frustrate the process
Allergan?s current Board is neither functionally independent nor provides the necessary, effective, independent oversight to best serve Allergan shareholders
CEO and Chairman David Pyott is the longest tenured director on the Board and dominates the current Board in his role as chairman; shareholders voted to strip him of the Chairman role at Allergan’s 2014 annual meeting, but were ignored
Michael Gallagher, current Lead Independent Director, is the longest-tenured non-management director, has never having voted against a proposal supported by Pyott and has refused to speak with Allergan’s largest shareholder without management present; received 33% withhold votes from Allergan shareholders at the 2014 annual meeting
Allergan?s Board is not responsive to shareholder feedback, has a long history of not reacting without direct shareholder pressure and has limited shareholders? rights
Rights to act by written consent and call special meetings were implemented only after majority supported shareholder proposals, at a threshold 2.5x what shareholders voted for (for special meeting) and with onerous information and procedural requirements mak ing it very difficult to exercise the right
Board declassification was acceded only after Allergan’s unsuccessful attempt to seek SEC no action relief to prevent shareholders from voting on it Lead independent director role was enhanced only in response to pressure from shareholders and proxy advisors Without direct shareholder pressure would Allergan have acquired Salix, a deal which would have been a disaster for the company
Allergan?s Board has not pursued any diligence and remains ignorant of Valeant and its business – despite Valeant?s willingness to meet, answer Allergan?s questions and stated willingness to increase the value of its offer
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Replacement of a majority of Allergan’s incumbent directors is
the only clear path to engagement
Allergans Board has a history of ignoring or obstructing non -binding shareholder votes
Did not respond to a shareholder proposal demanding that David Pyott be stripped of his Chairman role
Did not respond to 30% withhold votes for Lead Director Michael Gallagher at the 2014 AGM, and only improved the
weak1 Lead Director responsibilities in an attempt to prevent shareholders from approving the proposal to strip Pyott of
the Chairman role
In response to a shareholder vote in favor of a special meeting bylaws, implemented provisions with a threshold 2.5x
higher than requested by shareholders, and adopted onerous bylaws in an attempt to frustrate both rights
“This obstructive process echoes a trend of “[T]here is little credible reason to believe the “…this is quite a horse -
recalcitrant adherence to progressive Allergan board has in any meaningful way struck choker of a [special meeting]
corporate governance standards at Allergan, an appropriate balance between the ability of bylaw. … I mean, is there
including a period marked by active opposition shareholders to exercise their governance rights and another bylaw like that?”
to shareholder proposals…” – Glass Lewis & Co. the risk some shareholder might somehow abuse – Delaware Chancellor
those rights.” – Institutional Shareholder Services Andre Bouchard
Allergan was unwilling to respond to constructive shareholder feedback regarding its bloated cost
structure and poor capital allocation
Despite prior shareholder feedback, identified $475MM (approximately 22% of 2013 EBITDA) of excess operating
costs only after the launch of Valeant’s proposal
Despite prior shareholder requests, failed to repurchase stock at prices approximately half our current offer
“You have refused to engage with Valeant, describing their takeover offer as “grossly “The credibility question is amplified when a
inadequate.” We note, however, that the Board was not compelled by the value available board has demonstrated little interest in
via the repurchase of Allergan stock when it was trading at roughly half the current other opportunities to enhance
level through much of the second half of 2013. (As you may be aware, we encouraged shareholder value until it was suddenly
management to aggressively buy shares at those prices, which we believed were well below face-to-face with an unsolicited premium
intrinsic business value; no action was taken.)” – Jack son Square Partners offer.” – Institutional Shareholder Services
Note
(1) ISS report for 2014 AGM described the Lead Director role as “not sufficiently robust to provide an effective counterbalance” to David Pyott
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Replacement of a majority of Allergan’s incumbent directors is
the only clear path to engagement
Even after investors holding 39% of Allergan?s shares spent extensive time, money and effort to comply
with onerous special meeting requirements, Allergan refused to either engage or even acknowledge the
message sent by their shareholders
“In considering whether to submit written requests, “Despite receiving two premium bids, Allergan’s
stockholders were asked to evaluate if they wanted the board has refused to engage with either bidder.
opportunity to vote on the offer at a later date; not to This type of shareholder destructive action has
evaluate the merits of the offer itself. In fact, many led over 35% of Allergan’s shareholders to
stockholders have explicitly conveyed their view that request a special meeting to remove Allergan’s
the requests are not an endorsement of Valeant’s current directors.” – Pentwater Capital
offer.” – Allergan press release
Allergan?s non-management directors have abdicated their responsibility to provide effective oversight
over management and have allowed management to lead an “inappropriate” and “ unbusinesslike”
campaign
David Pyott has led all aspects of the response to Valeant’s offer
Non-management directors have refused to meet independently with Allergan’s largest shareholder or to
pursue diligence on or engagement with Valeant
Non-management directors appear ill-informed of Allergan’s “scorched earth” tactics
“I don’t think it would be appropriate for Allergan to take “…unbusiness like and it is inconsistent with our
affirmative steps to drive down Valeant’s stock price.” – responsibility to assess the hostile takeover attempt
Timothy Proctor (Allergan non-management director)(1) objectively.” – Timothy Proctor (Allergan non-management
director, responding to a document prepared by Allergan
[management] referring to Valeant as “vile”) (1)
Note
(1) Proctor deposition, page 137
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Replacement of a majority of Allergan’s incumbent directors is
the only clear path to engagement
In the face of shareholder opposition, Allergan?s incumbent directors continued exploring potentially
value destroying acquisitions that would prevent shareholders from having the opportunity to voice their
perspectives on the Valeant offer
David Pyott publicly stated that Allergan shareholders were encouraging a strategic acquisition
Only ceased pursuing an acquisition after unprecedented public opposition by long-term shareholders
“[V]ery clearly when I?ve sat down with our stockholders today they?ve said „ideally, the best thing we would like from you
on our wish list is go out and do a strategic acquisition that makes sense and creates even more value.?”
– David Pyott interview (CNBC Mad Money)
“[T]he Board seems focused on hastily closing a large “Over the past several months, “Pentwater is strongly
acquisition. Given the circumstances, this can only mean we have been watching with opposed to the board of
that the price paid must be dramatically higher than growing concern the corporate Allergan agreeing to any
would otherwise be the case , depressing potential returns governance practices of the significant acquisition that
on invested capital. More disturbingly, this approach appears Allergan board. The issues to be does not allow shareholders
to be intended to not only preempt shareholder approval, voted on at the special meeting … to vote on the transaction …
but also eliminate interest from the various bidders for are of such importance that they Such an action would render
the company. Management has defended this stance by impose a special duty on the board meaningless the upcoming
claiming that shareholder feedback has been strongly in favor to refrain from approving any special meeting scheduled for
of an acquisition…. That a large majority of Allergan significant, irreversible Dec. 18 and destroy value for
shareholders would support such a strategy is hard to commitments … unless all Allergan shareholders by
fathom, and doesn?t reflect our understanding of the shareholders are offered the failing to explore the
situation. If there are investors who feel this way, opportunity to vote on them.” premium bids that have been
however, we want to be very clear: we are not among – T. Rowe Price presented to Allergan.”–
them. … We strongly urge you to fully engage all available Pentwater Capital
paths, thereby ensuring value maximization.
– Jack son Square Partners
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VI. CONCLUSION
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Now is the time for Allergan’s shareholders to realize the
value of our offer
Valeant’s offer provides a significant premium to Allergan shareholders
114% premium(1) based on fair value(4) of the combined company
(2) company
Allergan shareholders receive at least ~$20 of combined
2016 EPS vs. ~$10 (3) standalone Allergan EPS
Allergan still refuses to negotiate despite our repeated efforts and the
significant value of our offer for their shareholders
Allergan shareholders need to remove a majority of directors in order for
Allergan to be compelled to negotiate, and realize the value of our offer
In all likelihood if we are not successful in removing a majority of
Allergan’s current Board we will retract our offer
We ask for a vote of “FOR” the independent nominees and supporting proposals
Notes
(1) Premium to Allergan?s unaffected price as of April 10, 2014 the day before Pershing Square crossed the 5% schedule 13D ownership level
(2) Based on 2016 PF EPS of $14.14 x 1.38 exchange ratio; Assumes reinvestment of $72 in cash in Valeant stock at $131 / share as of November 12, 2014
(3) Source: Allergan?s Press Release, dated October 9, 2014
(4) See slide 16
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