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Valeant vs. Cephalon: Putting the "Hostile" in Hostile Takeover

Valeant's (VRX) hostile takeover bid for Cephalon (CEPH) is certainly living up to the "hostile" part: A slideshow it made for investors basically says, "You suck, Cephalon. Hand over your shares by May 12 or we will leave you poor."

Cephalon responded with a Q&A for its employees (who hold a lot of its stock, judging by the tone of it). That Q&A is equally unsubtle. Its message is, essentially, "If Valeant succeeds you'll all lose your jobs and get no severance."

Compared to other recent takeovers -- Roche v. Genentech, Sanofi-Aventis v. Genzyme, Pfizer v. Wyeth and Merck v. Schering-Plough -- this one is shaping up more like one of Carl Icahn's brutal proxy fights than the type of seduction that usually occurs when a deep-pocketed suitor approaches a prospect with depressed stock.

Valeant's slideshow paints Cephalon's pipeline as a set of "risky R&D projects," not a set of assets, and paints its record of launching new drugs as a history of failures:

Then Valeant offers this ultimatum to shareholders:

If we have stockholder support by May 12th, we will move forward. If not, we will move on.
Valeant's offer is worth $73/share or $5.7 billion in total; CEPH declined to $58.75 before Valeant showed up. Valeant says it will increase its offer if Cephalon allows it to do due diligence on its books.

Fear and loathing at Cephalon
Cephalon's response, at first, seems to be hopelessly naive. A Q&A for its own employees begins, "What does 'hostile takeover' mean?" Oh boy, you think. These rubes are going to get eaten alive! But then Cephalon's underlying strategy shows through: Fear. Stick with the devil you know, Cephalon says, because Valeant wants to fire you:

Will there be layoffs? Will employees lose their jobs? Should I be looking for a new job?
Valeant has made public statements that suggest it would seek to reduce Cephalon's workforce in connection with the realization of expected "synergies" created by a combination of Cephalon and Valeant.

Will severance packages be offered to employees who lose their jobs?
Severance is a discretionary benefit and not a legal requirement, ... an acquirer of Cephalon would not be required to continue Cephalon's historical severance practice ...

The funniest part, however, is Cephalon's admonition that its own staff stop reading the news:
Should I believe what I read in the news about the Company and this acquisition?
Although we encourage employees to keep abreast of what is in the news about our Company, we encourage you to rely on the formal statements, news releases, and employee messages issued by the Company.
Yes, Cephalon employees. Ignore the scary headlines while you contemplate unemployment!


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