Ackman Structured Allergan-Valeant Trade to Skirt FTC Disclosure

Bill Ackman, the billionaire hedge fund manager who amassed almost 10 percent of Allergan Inc. to back a takeover bid by Valeant Pharmaceuticals International Inc., said he structured the trade to avoid triggering disclosure requirements from the U.S. Federal Trade Commission.

Using options gave his Pershing Square Capital Management LP the equivalent of $4 billion in Allergan stock while skirting rules requiring government approval to buy more than $75 million of a company “with an intent to influence control of the business,” Ackman said today.

“We weren’t looking for optionality, we were looking for a way to be exempt from the requirement -- to be allowed to get economic exposure -- without having to file first with the FTC, which would give the company notice that we were interested,” Ackman said in an interview today with Bloomberg Television’s Stephanie Ruhle and Erik Schatzker.

“No one’s being raided. Actually, what we’re doing is, we’re helping facilitate a transaction between two companies for the benefit of the shareholders.”

The “simplest” way to benefit from the transaction today is buying Valeant stock, Ackman said. The stock and cash offer from Valeant for Irvine, California-based Allergan is a “win-win” for shareholders of both, because they will end up owning the combined company, which Ackman likened to a Procter & Gamble Co.-branded consumer products play rather than a pharmaceutical company reliant on patented drugs.

“What you’re doing if you’re an Allergan shareholder is, you’re becoming a shareholder in the combined enterprise, and your ultimate outcome depends on how this business does over the next several years,” he said.

Less Overhead

Valeant runs more efficiently than its peers by avoiding the overhead of unnecessary “people sitting in offices” while investing in sales staff and low-risk, late-stage product research and development, Chief Executive Officer Mike Pearson said today in the same interview. Pearson has made more than 100 acquisitions since being recruited to run Laval, Quebec-based Valeant six years ago, and said the future owners of the combined entity wouldn’t want him to overpay to get the deal done.

“We put a very fair offer on the table and if you look at our history we are very, very disciplined in terms of prices we’re willing to pay,” Pearson said. “We’ll sit down with them, we want to get a deal done. We will be very disciplined, we think there’s a lot of value on the table.”

Under the offer terms, Valeant would pay $48.30 in cash and issue 0.83 percent of a company share for each Allergan share. With Valeant closing yesterday at $135.41 in New York, the offer is valued at about $48 billion, or $160.69 a share.