Allergan ‘Pill’ Ruling Sought in $54 Billion Valeant Bid

Allergan Inc.’s biggest investor, an affiliate of Pershing Square Capital Management LLP, asked a court to rule that its call for a special shareholder meeting to remove most of the drugmaker’s board won’t trigger an anti-takeover defense.

Pershing Square, headed by Chief Executive Officer Bill Ackman, is pushing Allergan to accept a $54.2 billion buyout offer from Valeant Pharmaceuticals International Inc. Allergan, maker of the Botox wrinkle treatment, rejected the increased bid on June 10, saying it undervalues the company and the board “has serious concerns about the large stock component.”

The hedge fund, which owns 9.7 percent of Irvine, California-based Allergan in a joint venture with Valeant called PS Fund 1 LLC, filed a preliminary proxy with the Securities and Exchange Commission June 2 to start the process for the shareholder meeting. PS Fund sued Allergan yesterday in Delaware, asking a judge to rule that the move won’t trigger the company’s “poison pill” defense against takeovers.

“We regret that we were forced to file this lawsuit,” Ackman said in a statement today. “Allergan’s failure to confirm that its poison pill does not apply to the actions taken in furtherance of calling a special meeting is a blatant attempt to frustrate shareholders’ ability to express their views and exercise their rights.”

Joint Venture

Valeant has raised its bid twice. Under the latest offer, Allergan shareholders would get $72 a share in cash, up from an initial $48.30, and 0.83 of a Valeant share, the Laval, Quebec-based company said May 30.

Pershing Square and Valeant said in April they formed PS Fund to acquire Allergan, starting with the 9.7 percent stake. Allergan “immediately” adopted the poison pill, or rights plan, PS Fund said. The plan allows shareholders to buy large amounts of stock at a discount if anyone obtains 10 percent of the company, making a hostile takeover prohibitively expensive.

The bidders filed yesterday’s lawsuit in Delaware Chancery Court in Wilmington on concerns that if they obtain approval from 25 percent of shareholders to seek a special meeting, they would be considered 25 percent “beneficial owners” of Allergan, triggering the poison pill.

Allergan hasn’t satisfactorily clarified the situation, the Pershing Square venture said. It asked the judge to affirm its right to call the meeting “to solicit shareholder views of Valeant’s proposal by voting on the removal of directors hostile to that proposal.”

‘Acquiring Person’

In a June 11 letter to Pershing Square’s chief legal officer, Roy Katzovicz, Allergan lawyer Mark Gentile said such solicitation of proxies “should not, of itself, cause PS Fund to become an acquiring person.”

It “would be all but impossible” to answer all the concerns without “a fully developed factual record,” he said.

Bonnie Jacobs, spokeswoman for Allergan, didn’t immediately respond to a request for comment on the lawsuit.

Allergan has urged shareholders to take no action on the fund’s request. Pershing plans to start soliciting for the special meeting June 30, with shareholders to consider it as early as Aug. 7. Allergan would be able to delay the meeting until November.

The case is PS Fund 1 LLC v. Allergan, CA9760, Delaware Chancery Court (Wilmington).

Before it's here, it's on the Bloomberg Terminal.