Allergan seeks to bar Bill Ackman from voting amid takeover bid
Attorneys for Botox maker Allergan Inc. asked a federal judge in Santa Ana on Tuesday to prohibit activist investor Bill Ackman’s hedge fund from voting in a shareholder election that could decide a hotly contested takeover effort.
At issue is a $50-billion-plus-dollar battle over the Irvine pharmaceutical company by Canadian firm Valeant Pharmaceuticals International Inc. with Ackman’s backing.
Allergan shareholders are scheduled to vote Dec. 18 on a proposal to remove a majority of its directors and replace them with board members who would probably agree to sell the company to Valeant.
On Tuesday, Allergan attorney Peter Wald urged U.S. District Judge David O. Carter to prohibit Ackman’s Pershing Square Capital Management from voting on any of its shares, saying the fund acquired its shares through insider trading because it bought them with knowledge of Valeant’s plans to buy the company.
It’s a key issue, because Pershing Square now owns nearly 10% of Allergan’s shares, giving it what might be the deciding votes in December.
In the weeks leading to Valeant’s purchase offer in April, Pershing Square bought more than $5 billion of Allergan stock, making it the company’s largest shareholder.
Allergan maintains that the shares were bought illegally with inside information.
“Unlawfully acquired shares shouldn’t be allowed to vote,” Wald told the judge in a crowded Santa Ana courtroom. “What we’re here to do is ask the court to rebalance the playing field.”
Pershing Square and Valeant maintain that the purchases were legal because they are partners in the offer to buy Allergan. Under federal securities law, a party offering to purchase a company is entitled to accumulate the company’s stock before a buyout attempt.
Insider-trading laws were designed to prevent business executives from tipping off friends or relatives to company secrets they could use to make profitable stock trades, noted Mark Holscher, an attorney for Pershing Square. They do not prohibit two companies from partnering together to acquire a company, he said.
“Allegations that someone engaged in insider trading are awfully serious and should be backed up by witnesses and documents — and they’re not,” Holscher said.
Judge Carter said he intended to issue a ruling “in a relatively reasonable period of time.”
Valeant has been fighting since April to acquire Allergan and its valuable trove of medications and devices. The Botox maker has rejected Valeant’s offers as too low, the most recent a combination of stock and cash now worth about $54 billion.
Valeant shares gained 0.4% to $131.07 on Tuesday. Allergan’s stock was up 0.2% to $182.60.
Allergan’s board has rejected two previous offers from Valeant. The Laval, Canada, company’s most recent offer, issued in May, would pay $72 in cash and 0.83 of a share of Valeant stock for each share of Allergan stock.
On Monday, Valeant Chief Executive J. Michael Pearson said in a letter to Allergan’s board that Valeant would consider increasing the offer to $200 a share — about 12% more than its current offer — and urged the Botox maker to begin negotiations.
Securities law experts have spent months debating whether the unusual partnership between a hedge fund and a pharmaceutical company gave Ackman’s fund the right to purchase shares with information that the selling shareholders did not have.
In August, Ackman acknowledged that the SEC was investigating his fund’s accumulation of Allergan shares. The agency has taken no action.
“Unless they act, I’m not going to draw any inference from the fact of the investigation,” Carter said.
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