The board and chief executive of Irvine takeover target Allergan Inc. heard a voice from the past Tuesday at the company's annual meeting of shareholders.
Gavin S. Herbert, Allergan's co-founder and former chairman, urged the company's directors to reject a buyout offer from Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman.
Speaking at Allergan's annual meeting in Irvine, Herbert told the board that he feared Valeant would cut the company's research and development budget as much as 80%, hampering its ability to produce new drugs and grow its business.
Herbert, 82, who now owns Roger's Gardens nursery in Corona del Mar, addressed the board during a public comment portion of the meeting. He was the only shareholder to mention the takeover bid at the meeting.
"That would really kill this company," Herbert said. "I am very much against that."
Shareholders and Allergan employees burst into applause.
He also questioned Valeant's financial health, saying that the company would be burdened by heavy debt if it acquired Allergan.
Allergan chief David E.I. Pyott told shareholders that the company would not discuss the buyout offer at the annual meeting. He said the company intends to respond to Valeant's offer in a couple weeks.
Pyott told shareholders that he's particularly proud of Allergan's focus on research and development. He said the company spent $1.1 billion on research and development last year and expects that number to grow to $1.5 billion by 2017.
Last month, Ackman and Valeant offered an estimated $45 billion in cash and stock for Allergan, which sells breast implants and ophthalmic drugs in addition to Botox. They said the combined company would be extraordinarily profitable, in part because it would trim Allergan's research and development spending to about $300 million a year.
Allergan has said it will review Valeant's proposal carefully before issuing a response. The company implemented a "poison pill" defense to slow Ackman and Valeant's pursuit of the company, then reportedly pursued other potential buyers. Analysts said Allergan would be leery of Valeant's offer, particularly given its vow to slash Allergan's research and development budget, a move that probably would mean the elimination of hundreds, or even thousands, of jobs.
Allergan shares fell $2.68, or 1.6%, on Tuesday to $166.32. Valeant shares lost $2.84, or 2.1%, to $133.35.