Judge: Yes to Allergan shareholder meeting, but questions Valeant, Pershing Square joint bid

A U.S. district court has ruled that Pershing Square Capital Management can vote its 9.7% stake in Allergan in a special shareholder meeting on Dec. 18.

However, District Court judge David Carter said Allergan has raised “serious questions” concerning whether Valeant Pharmaceutical International and Pershing Square’s joint hostile takeover bid for Allergan violated laws prohibiting insider trading.

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Specifically, the judge ordered Pershing Square and Valeant to provide additional disclosures regarding their joint bid. Allergan noted that the court ruled Valeant and Pershing Square must disclose that their agreement included a clause that the companies agreed to be called co-bidders if the acquisition of Allergan proceeded as a tender offer.

“Today’s ruling is a victory for all Allergan shareholders as it puts the choice of Allergan’s future in the hands of its owners,” said J. Michael Person, chief executive officer of Valeant.

The Canadian drug maker-which has been rumored to be considering increasing its offer for Allergan by $15 per share-said the requested disclosures would be promptly made.

The ruling is a part of a lawsuit in which Allergan accused Valeant and Pershing Square of engaging in insider trading, and asked the court to prevent Pershing Square from voting its stake in the shareholder meeting.

During the Dec. 18 meeting, Allergan stockholders would be asked to remove most of the company’s existing directors in connection with Valeant’s unsolicited bid to acquire all outstanding common shares of Allergan for 0.83 shares of Valeant common stock and $72 in cash.

At the end of August, Allergan confirmed it had received requests from its stockholders regarding Pershing Square Capital Management’s push to call the special meeting.

The written requests were from 31% of shareholders in favor of the meeting, which surpassed the 25% threshold required by Allergan’s corporate bylaws.

In considering whether to submit written requests, shareholders were asked to decide if they wanted the opportunity to vote on the offer at a later date-not to evaluate the merits of the offer itself.

According a prepared statement, Allergan claimed “many stockholders have explicitly conveyed their view that the requests are not an endorsement of Valeant’s offer.

“Allergan recognizes that this is all about stockholder value, and the board remains confident in the company’s ability to create significantly more value than Valeant’s offer,” the statement continued. “While Allergan does not believe that Valeant’s offer provides compelling value relative to the alternatives available to the company, the Allergan Board of Directors fully supports the right of stockholders to vote on the value proposition offered by Valeant at the appropriate time.”

In light of the court’s ruling this week, Allergan insisted it was satisfied with the verdict despite losing its bid to hold off Pershing Square from the special meeting.

“(We are) pleased that the court ruled there are serious questions as to the merits of Allergan's insider trading case against Pershing Square and Valeant and ordered them to revise their disclosures,” the company said in a prepared statement.