Ackman Accused of Insider Trading in Allergan Shareholder Suit

Bill Ackman, who made about $2.5 billion from his investment in botox-maker Allergan Inc. ahead of a takeover attempt by Valeant Pharmaceuticals International Inc., was accused of insider trading by an Allergan shareholder.

Ackman’s Pershing Square Capital Management LP was only able to generate such outsized profits by “taking advantage of insider information provided by Valeant and acquiring a very significant stake in Allergan ahead of the broader market,” according to the federal court complaint in Santa Ana, California. Investor Anthony Basile said he sold Allergan shares before Valeant announced its takeover plans.

Allergan rejected each offer Valeant made and last month agreed to sell itself instead to Actavis Plc for $219 a share. That was about double the share price when Ackman started accumulating his stake in the company in February. Allergan in August accused Ackman and Valeant of insider trading in a lawsuit pending in Santa Ana.

Basile, in his Dec. 16 complaint, seeks to represent Allergan investors who sold shares from Feb. 25 to April 21, the period during which Ackman acquired his shares and before Valeant went public with its interest in a merger. He seeks unspecified damages for securities law violations by Valeant and Pershing Square.

Pershing Square said it’s reviewing the complaint and will respond in due course. Valeant declined to comment on it.

Allergan last month lost a bid to prevent Ackman from voting at a shareholder meeting he had called to oust Allergan directors opposed to the Valeant takeover. Ackman withdrew his request for a proxy vote after Allergan agreed to the $66 billion takeover by Actavis.

Allergan, based in Irvine, California, said in a Dec. 13 court filing that it intends to proceed with its remaining claims against Ackman. New York-based Pershing Square said in the joint filing that it intends to seek dismissal of Allergan’s remaining claims as moot.

The shareholder case is Basile v. Valeant Pharmaceuticals International Inc., 14-cv-02004, U.S. District Court, Central District of California (Santa Ana). The earlier case is Allergan Inc. v. Valeant Pharmaceuticals International Inc., 14-cv-01214, U.S. District Court, Central District of California (Santa Ana).

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