Cephalon rejects Valeant takeover offer

SAN FRANCISCO (MarketWatch) — The board of biotech group Cephalon Inc. formally rejected late Tuesday a $5.7 billion hostile takeover bid by Canada's Valeant Pharmaceuticals International Inc., calling it opportunistic and falling far short of the company's true value.

"After a thorough review, the Cephalon board of directors has unanimously concluded that your March 29 unsolicited non-binding proposal is inadequate and not in the best interests of Cephalon shareholders," the board wrote in a letter to Valeant Chief Executive Officer J. Michael Pearson.

Valeant is taking its fight directly to Cephalon shareholders following the rejection. The firm said in a statement late Tuesday that it has filed a preliminary consent solicitation statement with the Securities and Exchange Commission.

Valeant is seeking written consents from Cephalon stockholders in a bid to unseat the Cephalon board, and has nominated seven new directors it wants installed in their place.

"It is Valeant's expectation that a new Cephalon board would act in the best interests of Cephalon stockholders and remove the impediments to a tender offer," the firm said in the statement.

Cephalon (CEPH 77.37, +0.45, +0.59%) shares fell $1.11, or 1.4%, to $76.26 in after-hours trade. Valeant (VRX 53.96, +0.98, +1.85%) shares shed 46 cents, or 0.9%, to $53.50.

Valeant launched its takeover bid March 29, offering Cephalon shareholders $73 a share in an all-cash deal, a 25% premium to where Cephalon shares were trading at the time. Read about Valeant's takeover offer.

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Cephalon's board criticized Valeant for basing its bid on a $56.74, 30-day moving average of its share price, not much more than the stock's 52-week low of $54.15. As such, the board said Valeant was offering "virtually no premium to Cephalon's 52-week high."

In fact, Cephalon shares hit a 52-week high of $77.58 earlier Tuesday, a week after Valeant made public its takeover offer, an indication some shareholders expect the bidding to go higher. Cephalon shares' previous high-water mark was $71.39, set in late March 2010.

Valeant, headquartered in Mississauga, Ontario, is itself the product of a merger in 2010 between Canada's Biovail Corp. and U.S.-based Valeant. 

Jim Jelter is Industrials Editor for MarketWatch in San Francisco.Virginia Harrison is a MarketWatch reporter based in Sydney.

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