Allergan, the maker of Botox is supposedly cutting about 13% of its workforce to become more cost effective and efficient as it fights a hostile take over bid from Valeant Pharmaceuticals. The company reported its plans to cut down about 1500 of its employees and 250 vacant positions as it aims to focus on its “high value” opportunities, on Monday. According to Allergan this strategy will yield annual pretax savings of about $475 million in 2015.
Interestingly, Allergan announced the cuts the same day they revealed their second quarter results which seem to have surpassed the expectations of the analysts. CEO David Pyott told analysts during a conference call that the results were an indication that the company was on the right track and the announced actions would take them further ahead.
The takeover certainly isn’t big news since Allergan has rejected several offers in the past from Valeant Pharmaceuticals and others like Bill Ackman’s Pershing Square Capital Management. In fact, the latest offer amounts to $53 billion in cash and stock! Another important fact is that Valeant has promised to cut down costs of its own if Allergan agrees to co-operate. Bill Ackman told CNBC that Allergan should have taken these steps some time ago and the shareholders have been asking this for some time. Bill Ackman himself, has a 9.7% stake in the company. Ackman expressed disappointment in Allergan’s decision to fight off the takeovers since he seems to think that their opportunities have been curtailed as a result of standing alone.
He is reported to have said. “Allergan can only achieve so much as a stand alone company.” Allergan on the other hand, has now resorted to ‘poison pill’ defenses and Pyott seems to think that Valeant’s offer is unreasonably far from the “intrinsic value” of their company. There is bad blood between the two companies and they have been publicly criticizing each other about the takeover since April. Valeant has even recently complained to the Securities and Exchange Commission and authorities in the Canadian province of Quebec about Allergan’s false statements regarding Valeant’s business.
Valeant Chairman and CEO J.Michael Pearson believes that they are obligated to take action against Allergan’s attempts to ‘mislead investors and manipulate the market for Valeant stock.” Allergan however claims the statements to be true and responded by an email, asking Valeant to reveal the ongoing activities of their business. Allergan said on Monday that it expects Botox to deliver net sales from $2.2 billion to $2.28 billion. The use of Botox itself is surrounded by much controversy. It is a product used to make aging lines on the skin smoother but its also known to treat neck spasms, eye muscle disorders, migraines and some other conditions.