ISS Addresses Valeant-Allergan Takeover Bid, Says Shareholders Should Back Special Meeting

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By Caroline Chen and Beth Jinks  

Aug. 6 — Allergan Inc. shareholders should support a special meeting, a second investor advisory firm said Aug. 6, in a boost to Valeant Pharmaceuticals International Inc.'s efforts to take over the company.

The recommendations are making it more likely that activist investor Bill Ackman's Pershing Square Capital Management LP can obtain the support he needs to hold the meeting to remove most of the board at the maker of Botox. Ackman needs at least 25 percent of Allergan's shareholders to agree to the meeting. His goal is to add six new directors and push through a deal.

“There appear to be significant governance issues which could be addressed” at the proposed meeting, said Institutional Shareholder Services Inc. The recommendation follows a similar determination Aug. 5 by Glass Lewis & Co, the other top proxy advisory firm.

ISS is weighing in on the increasingly acrimonious takeover attempt by Laval, Quebec-based Valeant. Responding to a senior lawmaker on the House Financial Services Committee, the SEC said in a July 2 letter that it is keeping an eye on the attempted takeover.

Ackman has amassed a 9.7 percent stake in Allergan to help shepherd the deal.

The adviser also criticized restrictive bylaws Allergan adopted that make it difficult to call special meetings, noting the shareholders could undo those at the proposed meeting.

‘Come-to-Jesus' Vote

“Valeant has publicly indicated it will not further increase its offer without engagement from the Allergan board,” ISS said. “How compelling that offer is, however, remains unclear this far in advance of a special meeting, precisely because neither bidder nor target has yet had to face a come-to-Jesus shareholder vote on their plans for the future of Allergan.”

The ISS report should cause shareholders to question the credibility of Allergan's board that is “pursuing frivolous litigation tactics and baseless attacks” to thwart the deal and change company bylaws, Ackman said in a statement.

Allergan, which has refused talks with Valeant, sued on Aug. 1, claiming the drugmaker colluded with Pershing Square to profit from trades ahead of the bid's announcement, using its insider knowledge of the impending offer. Valeant and Pershing Square called the lawsuit a “desperate attempt to delay or avoid” the special shareholder meeting requested by Ackman.

“Allergan's board of directors and management team remain focused on delivering significantly more value than Valeant's proposal,” Allergan said in an Aug. 6 statement. “These recommendations do not change the fact that Valeant's offer is grossly inadequate.”

The Allergan deal is one of several recently announced mergers and acquisitions that would involve a corporate inversion—a reincorporation of corporate operations overseas to realize tax benefits. Congress and the Obama administration are eyeing myriad strategies to slow, or stop altogether, the tactic.

With assistance from Marie French and Sonali Basak in New York

To contact the reporters on this story: Caroline Chen in New York at; Beth Jinks in New York at

To contact the editor responsible for this story: Reg Gale at

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