| Things are getting uglier between Valeant Pharmaceuticals and Allergan, the maker of Botox. The former, with a little help from hedge-fund manager Bill Ackman, is attempting a hostile takeover of the latter (previous coverage here). Over the last few weeks, Valeant has been slowing upping its bid for the company (to $53 billion from the original $45 billion). That's pretty normal in mergers and acquisitions, says Daniel Hoffman of Pharmaceutical Business Research Associates. What's interesting about Valeant's bid is that "within this same span of a few weeks, attitudes in both pharma and the investment community made a radical turn from mild approval to complete revulsion." The latest development in this saga, writes David Gelles, is that Valeant plans to take an exchange offer to shareholders, offering them a mix of cash and stock for their shares. Matt Levine says this is "mostly a cosmetic development" since "the shareholders can't accept the exchange offer until Allergan rescinds its poison pill, and that's not gonna happen unless the board agrees or is voted out at the special meeting Valeant is trying to call." Allergan's poison pill aims at preventing Ackman significantly expanding his 9.7% stake in the company by offering discounted shares to other stakeholders if any unapproved investor acquires 10% or more of Allergan's stock. Perhaps the more interesting development came on Monday, when it came out that at an earlier stage in the deal, Morgan Stanley sent Allergan some emails denigrating Valeant. Allergan released the emails as part of a larger package to show why shareholders should reject Valeant's offer. This is awkward since Morgan Stanley is now working on Valeant's side. Levine, in a separate post, notes that the job of an investment bank is to get hired in a big M&A deal, so it's pretty normal to pitch both sides. "What Morgan Stanley didn't count on was the incredibly intense hostility that this deal has engendered," he writes. Valeant's CEO stood by Morgan Stanley, using the opportunity to suggest that, "it's clear that Allergan's release [of the emails] is a sign of desperation." John Hempton at Bronte Capital has started a series of posts about Valeant, which he's not too impressed with — there are seven so far, including one on corporate jets. Basically, Hempton takes issue with Valeant's accounting, and thinks it might be close to going bust. Valeant had a "fact-based presentation" yesterday, addressing some of Hempton's concerns on a conference call. Hempton responds here. Dan McCrum has also been on the Valeant financials, and writes that it's "a company that only makes a profit after a lot of accounting adjustments." Doesn't look like this fight's going to get prettier anytime soon. — Shane Ferro On to today's links: Primary Sources
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