3.Is Valeant offering a premium to Allergan’s shareholders for the change of control?
Ans:Valeant proposed multiple offers to Allergan, each better than the previous one. On 21st April 2014, Valeant made a public offer to Allergan’s leadership team to merge the two companies. Valeant proposed exchanging $48.30 in cash plus 0.83 shares of Valeant (at $126/share that day) for each share of Allergan, a total value of $152.88 per share. This was a premium of 31% over Allergan’s stock price of $116.63 on 10th April.On 28th May, Valeant increased the cash component of its offer by $10 per share, from $48.30 to $58.30 per share. This increased the total offer to $166.16 per share, $58.30 in cash and 0.83 shares of Valeant trading at $126.95 per share.On 29th May, Bill Ackman concluded that if the offer price was raised to an effective of $180 per share then the offer would receive support.On 30th May, Valeant increased the offer once more. The cash component was increased from $58.30 to $72 per share. Valeant’s share price had closed at $129.22 the previous day, making the effective offer $179.25 per share, plus the possibility of a contingent value right (CVR) of $25 per share.Hence Valeant was willing to give the shareholders of Allergan a significant premium for the change of control.