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Valeant, Pershing File Amended Complaint, Call Scheduled Allergan Meeting a “Sham”

Friday, September 5, 2014

By Michael Greene and Jef Feeley

Sept. 4 — In the latest chapter of an increasingly ugly $54 billion takeover bid, Valeant Pharmaceuticals International Inc. and Bill Ackman's Pershing Square Capital Management are calling Allergan Inc.'s investors meeting scheduled for December 18 a “sham”.

In an amended complaint filed Sept. 2 in the Delaware Court of Chancery, Valeant and Ackman ask the court to order Allergan to call a special meeting between 45 and 50 days after a scheduled Oct. 6 trial, which would be about a month before Dec. 18.

On Aug. 27 Valeant and Ackman won a bid to fast-track the resolution of their complaint, which seeks to force Allergan to hold a special shareholder meeting to consider replacing a majority of the company's directors.

Oct. 6 Trial

Chancellor Andre Bouchard set the Oct. 6 trial date to decide whether Valeant and Ackman properly secured the support of enough Allergan stockholders to force the special meeting. The pharmaceutical company and hedge-fund manager want to clear the way for their takeover bid for the maker of Botox.

Allergan officials, who have rejected the buyout offer, announced Aug. 26 that they will hold an investor meeting Dec. 18.

But in the amended complaint, Valeant and Ackman said the investors meeting serves “no purpose other than litigation-driven posturing, and is legal nullity.” They claim that the selection of the December 18 date is the “latest in a string of defensive measures designed to disenfranchise the shareholders” and ask Bouchard to make the company move more quickly.

In his Aug. 27 order, Bouchard opined that Allergan shareholders' potential loss of their right to vote on whether to accept Valeant's and Ackman's cash-and-stock bid created “a risk of irreparable harm” that required the Delaware lawsuit to be handled on an expedited basis.

Valeant, based in Laval, Quebec, wants to buy Allergan to expand its portfolio and become one of the world's largest drugmakers. David Pyott, Allergan's chief executive officer, has fought to keep the company independent, announcing a restructuring that includes cutting 1,500 jobs.

Advisory Groups

Two shareholder advisory groups have recommended Allergan investors back the special meeting pushed by Ackman. The activist investor wants to add six Allergan board members and push through the deal with Valeant. Valeant has offered $72 in cash and 0.83 of a Valeant share for each Allergan share.

Valeant and Pershing Square officials said they delivered papers Aug. 22 indicating that more than 30 percent of Allergan shareholders back a special investor meeting (see related story, page 1040).

The pharmaceutical maker and the hedge fund sued in the chancery court Aug. 22 asking Bouchard to find that they had complied with Allergan's bylaws in lining up stockholder support for their meeting request.

Allergan had proposed a Nov. 24 trial on whether the company's suitors had properly provided documentation on shareholders' support for the special meeting.

In their haste, the investors “are attempting to deprive stockholders of material information regarding their alleged insider-trading violations and impede the Allergan board's ability to consider strategic alternatives,” according to an Allergan statement sent by Scott Bisang, of the Joele Frank public relations firm in New York.

‘No Games'?

Laurie Little, a Valeant spokeswoman, and Francis McGill, a spokesman for Pershing Square from Rubenstein and Associates, both declined to comment.

Lawyers for Valeant and Ackman told Bouchard Aug. 27 they were concerned that Allergan executives were dragging their feet in setting a trial date on the meeting request to provide time for an alternative buyer to make a bid. The drugmaker approached Salix Pharmaceuticals Ltd. in recent months about making a bid, people with knowledge of the matter have said.

Valeant and Ackman are worried that a deal “could be forced upon shareholders” without a vote, David McBride, one of Ackman's lawyers, told Bouchard.

Allergan officials aren't seeking to delay a trial over Valeant and Ackman's push to force a special shareholder meeting and to properly set a date for the gathering in December, countered William Savitt, one of the drugmaker's lawyers.

“There's no games here,” he said. Allergan officials simply need time to review Valeant and Ackman's submissions backing up the meeting request. “It's not true that we are avoiding a timely trial date at all costs.”

Allergan's Lawsuit

Bouchard said Valeant and Ackman raised legitimate doubts about whether the Dec. 18 meeting date was firm. “It's pretty apparent to me that Allergan may not want to have a special meeting at all.”

Earlier this month, Allergan sued Valeant and Ackman in federal court in California claiming the drugmaker colluded with the hedge-fund manager to profit from insider trades tied to the takeover bid.

U.S. District Judge David Carter in Santa Ana, California, last week denied Allergan's request for an expedited hearing for its insider trading lawsuit, clearing the way for Valeant and Ackman to begin an effort to force Allergan officials to schedule the shareholder meeting (Allergan Inc. v. Valeant Pharm. Int'l, Inc., C.D. Cal., No. 8:14-cv-01214, complaint filed 8/1/14).

Allergan Aug. 26 filed another request with Carter for expedited handling of its complaint and said it's seeking a court order to prevent Valeant, Pershing Square and Ackman from voting their shares in any special meeting.

Allergan fell $1.87, or about 1 percent, to $162.09 after Bouchard's ruling was announced Aug. 27. The drugmaker's shares have risen more than 84 percent during the past 12 months.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com and Jef Feeley in Wilmington, Del. at jfeeley@bloomberg.net

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com and Michael Hytha at mhytha@bloomberg.net

 

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