Ackman Win Over Allergan on Vote Moves Contested Valeant Buyout Closer

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Edvard Pettersson and Karen Gullo

Nov. 4 — Bill Ackman, Allergan Inc.'s largest shareholder, Nov. 4 defeated the company's bid to block him from voting against six directors at a Dec. 18 shareholder meeting, potentially clearing the way for Valeant Pharmaceuticals International Inc. to buy the Botox maker.

U.S. District Judge David Carter denied Allergan's request to exclude the billionaire hedge fund manager from voting his 10 percent stake. However, he said that Ackman must disclose details of his co-bidding relationship with Valeant in “corrective disclosures” to a Sept. 24 proxy solicitation.

Allergan, which challenged that relationship with Ackman's Pershing Square Capital Management LP, said it would appeal the ruling.

“Although there is something inherently appealing about preventing someone who may have violated the securities laws from using their allegedly wrongfully-acquired shares to carry out their ultimate plan, and such an injunction is undoubtedly within the courts' broad equitable powers, the court does not believe such an injunction is appropriate at this time and in this case,” Carter opined.

In ordering more information on the co-bidding between Valeant and Ackman, Carter preliminarily barred them and anyone acting on their behalf from voting any proxies they solicited based on the Sept. 24 statement, or soliciting any more proxies, until the required disclosures are made.

Hostile Bid

Allergan, based in Irvine, Calif., has been trying to fend off what was valued as a $54-billion hostile bid by Valeant, calling the offer “grossly inadequate” and alleging the Canadian company would gut Allergan's research and development budget and use its cash flow to pay down debt accumulated from previous acquisitions.

Valeant is seeking to buy Allergan to expand its portfolio and become one of the world's largest drugmakers. The company formed a joint venture with Ackman's Pershing Square Capital Management LP in February to acquire a 9.7 percent toehold in Allergan before going public with its acquisition plans a few months later.

Refused Negotiations

After Allergan refused to negotiate with Valeant, Ackman used his 10 percent stake to push for a special meeting where shareholders could remove the majority of Allergan's board as well as the company's poison pill defense against hostile takeovers that it adopted after Valeant's initial merger overtures in April.

In August, Allergan sued Valeant and Ackman, accusing them of insider trading. Ackman has said that he welcomes a review by the Securities and Exchange Commission of Pershing Square's takeover tactics and that it did nothing wrong.

“Today's ruling is a victory for all Allergan shareholders as it puts the choice of Allergan's future in the hands of its owners,” said J. Michael Pearson, Valeant's chairman and chief executive officer. “We look forward to the Dec. 18 special meeting, where we hope to move a large step closer to the compelling combination of Valeant and Allergan.”

Allergan hailed the judge's injunction on proxies, saying it was pleased that “the court ruled there are serious questions as to the merits of Allergan's insider trading case against Pershing Square and Valeant.”

Valeant said Oct. 27 that it's prepared to raise its hostile takeover bid for Allergan to at least $200 a share to win support from the target's board. Allergan should come to the table to discuss the offer before its shareholders meet Dec. 18, Laval, Quebec-based Valeant said in a statement.

With assistance from Caroline Chen in New York

To contact the reporters on this story: Edvard Pettersson in Los Angeles at; Karen Gullo in San Francisco at

To contact the editor responsible for this story: David E. Rovella at

The order is available at

 ©2014 Bloomberg L.P. All rights reserved. Used with permission.