- Posted July 22, 2014 by
Allergan Thwarts Takeover by Announcing Layoffs
On Monday, Allergan announced it's eliminating 1,500 positions, most of which are based in Southern California. The news was delivered by its chief executive.
Allergan chief David Pyott said in an interview with the LA Times that the company will also close its Santa Barbara and Carlsbad facilities, each currently employing 300 and 100 people, respectively.
The maker of Botox and various other innovative pharmaceuticals, Allergan plans to eliminate a total of 650 positions in research and development, most of which reside at the expansive Irvine campus.
“Sadly, I have to say, it will be quite a big effect on Southern California,” Pyott said. “Clearly there’s a big impact in Irvine.”
The reason for cuts is to increase profits and align Allergan as a more appealing investment in an effort to thwart a $54 billion takeover attempt by Valeant Pharmaceuticals International Inc, based out of Canada.
This inveitably means the outsourcing of jobs which has untold benefits for a company in helping reduce costs.
“Hopefully, at the end of the day, this will put more value on the table than the other side,” Pyott hopes.
If the acquisition takes place, Valeant would cut research spending to increase profitability. Their plan includes 5,000 job cuts.
Pyott states cuts of 1,500, about 13 percent of Allergan's global workforce, are nothing compared to Valeant's reductions.
Valeant's takeover attempt ignited concerns among Allergan employees, Irvine merchants and the city’s mayor over potential job losses, with over 20 percent of Allergan's employees located in Irvine.
Pyott says he plans to cut jobs by Thanksgiving, stating the task to be "extremely unpleasant."
Chief executive at Valeant, J. Michael Pearson, says research and development needed cuts because it was overstaffed and running inefficiently.
He adds that Allergan's planned cuts "validate our view that Allergan's management has a poor record of managing costs," adding that he believes the "greatest value for both Allergan and Valeant shareholders" would be achieved through a merger.
According to Allergan, its restructuring effort will boost productivity and efficiency, strengthening stockholder value and hopefully producing in $475 million in pretax savings next year.
The company also announced its second-quarter earnings on Monday. Net income increased 16% to $417.2 million, or $1.37 per share, compared with a year earlier, while revenue grew 17% to $1.86 billion.