Valeant took its $50-billion US offer for Allergan to shareholders today. (Canadian Press) (Canadian Press)

Valeant Pharmaceuticals launched a potentially long hostile battle to acquire Allergan by making its case directly to the Botox-maker's shareholders.

The Quebec-based company formally launched an exchange offer to Allergan shareholders on Wednesday, after the California-based company's board of directors repeatedly refused to negotiate a deal.

Valeant has offered $72 US in cash plus 0.83 of a Valeant share for each share of Allergan.

At Wednesday's afternoon trading price $118.57, that would value Allergan's shares at $170.41, making the offer worth just more than $50 billion.

"We believe Allergan's stockholders should have the opportunity to express their views and we are confident that Allergan's stockholders will support this combination," Valeant chairman and CEO Michael Pearson said in a statement on Wednesday.

Ackman wants to fire 6 directors

Valeant's co-bidder, Bill Ackman's Pershing Square Capital Management is also seeking to call a special meeting of Allergan's shareholders to remove six directors. Pershing owns 9.7 per cent of Allergan.

Pearson said the two efforts are part of Valeant's "clear path to complete a transaction with Allergan."

Valeant's offer expires Aug. 15, unless extended. It includes a number of conditions, including the removal of various anti-takeover obstacles Allergan's board put in place, the tender of a majority of Allergan's shares and the termination of waiting periods. Valeant shareholders would also need to approve the issuance of shares as part of the transaction.

Valeant has said it sees no need to raise its offer again for Allergan, even though the company's refusal to negotiate has hurt its share price and reduced the value of its bid.

Formal offer made

Pearson said Tuesday that he expects Valeant's share price will recover as it takes its offer directly to Allergan shareholders and the date of a special meeting is determined.

The formal offer for Allergan comes a day after Valeant held a conference call to once again try to dispel what is claims are misconceptions about the company.

Allergan said Wednesday it would "carefully review" the unsolicited exchange offer, but advised its stockholders to take no action at this time.

The company's board unanimously rejected the offer on June 10, saying the revised offer "substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of Allergan and its stockholders."

Allergan has repeatedly questioned Valeant's business model, claiming it is unsustainable and based on serial acquisitions.

Concern over Valeant business plan

David Maris of BMO Capital Markets said the conference call did "little to clear the air of concerns that many Allergan shareholders have over the Valeant business model."

Of top concern is Valeant's financial numbers.

He said Valeant's organic growth is small compared to Allergan, its debt has risen dramatically to $17.7 billion from $3.2 billion in 2010, its unadjusted results show a loss, receivables have risen faster than sales and goodwill as a percentage of total assets grew to 35 per cent in 2013 from five per cent in 2009.

"The combination of these items makes some Allergan shareholders concerned that the stock they would receive in a deal is that of a company that is showing concerning trends, not strength," Maris wrote in a report.

Maris also questioned the reasons given for the departure of the senior executive that ran Valeant's aesthetics, given that the Allergan deal would result in a larger aesthetics company.

He also said it's unclear that the effort to replace Allergan directors would guarantee support for the transaction if they are truly independent.

"We believe that shareholders should anticipate that this process will run well into next year," he added.

The analyst said Allergan is "significantly undervalued" with many ways to grow and boost its share price, which he says is worth more than $200 US per share as a stand alone company and without a control premium.