Congressman Questions Pershing Square’s Planned Allergan Referendum

May 29 2014 | 9:58am ET

A California congressman has waded into the battle between Valeant Pharmaceuticals and Allergan Inc., asked federal regulators to look into Pershing Square Capital Management’s planned shareholder referendum on the latter’s bid for the former.

Rep. Edward Royce (R-Calif.) warned that the unusual effort taking place outside of Allergan’s standard proxy process “could make it difficult for shareholders to truly understand what is occurring.”

Pershing Square has filed for a non-binding shareholder referendum on Valeant’s offer for Allergan, which Valeant increased yesterday. The hedge fund is Allergan’s largest shareholder and is working with Valeant on the deal.

“This is the first shadow shareholder referendum of its kind filed at the” Securities and Exchange Commission, “and it’s at the expense of shareholder transparency,” Royce wrote the SEC Chairman Mary Jo White. “My immediate concern is that the SEC performs a thorough review of the details of this filing with that transparency in mid. Allergan’s investors and the U.S. capital markets deserve nothing less.”

Allergan is based in Irvine, Calif., just south of Royce’s district, and the company’s political action committee has donated $5,000 to Royce’s reelection campaign.

Pershing Square founder William Ackman rejected Royce’s concerns, telling The Wall Street Journal “there is nothing more transparent than a vote of the shareholders under the SEC’s proxy rules.” Valeant CEO Michael Pearson chided Allergan, which has rejected the offer and blasted Valeant’s business model, for “spending an awful lot of time trying to get [the shareholder vote] outlawed and not happen.”

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