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Allergan and Valeant trade blows as shareholder meeting looms

Published on 06/11/14 at 09:59am
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Allergan's efforts to block a key supporter of Valeant's hostile takeover bid from voting at next month's special shareholder meeting have been quashed in court.

Investment fund Pershing Square - which has amassed a 9.7% stake in Allergan - can now use its block vote at the 18 December meeting to try to replace several of Allergan's directors with candidates that will support the merger of the two drugmakers, according to the judge hearing the case.

While the verdict clearly weakens Allergan's defense against Valeant, the company said it would immediately appeal and took some solace from the judge's assertion that there are ‘serious questions’ still to be answered about whether Pershing and Valeant's combined bid contravened insider trading rules.

Specifically, the court asked Valeant and Pershing to provide ‘corrective disclosures’ to a September statement indicating that they had agreed to be called ‘co-bidders’ if the Allergan-Valeant transaction occurred by way of tender offer.

Allergan says in a statement it believes "it is important that the rights of the company's stockholders not be infringed by the actions of one hedge fund that significantly profited … by trading in Allergan securities while in possession of material non-public information".

Valeant chief executive Michael Pearson did not comment on the insider trading allegations but says the decision to allow Pershing to vote at the special meeting "is a victory for all Allergan shareholders as it puts the choice of Allergan's future in the hands of its owners".

Allergan has been the target of several takeover bids from Valeant this year, the latest of which was valued at $54 billion, but has rejected each advance, saying it 'substantially undervalues' Allergan.

Allergan's board insists that Valeant's strategy of acquiring businesses and slashing costs would destroy the value it has built up in its business – and place a number of promising pipeline projects under threat.

The company is also trying to enlist the support of the medical profession in resisting Valeant's advances, asking clinicians to sign an open letter expressing concern that an acquisition of Allergan by Valeant would "greatly decrease funding for R&D and would thus negatively impact our practices and our ability to provide the highest quality care to our patients".

Actavis interest? 

Analysts said that clearing the path for Pershing to vote at the meeting now makes it more likely that Allergan will try to agree an alternative merger or acquisition that will make it too big for Valeant to swallow, and once again Actavis is being named as a possible contender.

Allergan said earlier this week it had received an alternative bid but did not disclose the company involved. Actavis - which is somewhat akin to Valeant as it has grown inorganically via a series of acquisitions in recent years - has already bought Forest Laboratories and Warner-Chilcott this year.

Phil Taylor

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