Pershing Square Preps Proxy Contest For Allergan

Jun 3 2014 | 2:38am ET

The gloves have come off in the battle over Allergan Inc.’s future, with Pershing Square Capital Management announcing plans to seek control of the pharmaceutical company’s board.

The New York-based hedge fund, Allergan’s largest shareholder with a 9.7% stake, said it would abandon its plan to hold a non-binding shareholder referendum of a proposed buyout by Valeant Pharmaceuticals International, which Pershing Square supports. Instead, the hedge fund will seek to oust a majority of Allergan’s board at a special meeting later this year.

The move comes after Valeant, which is working with Pershing Square, raised its offer for Allergan by another 8%, to $54 billion, on Friday. That increase came just two days after it raised its initial offer—rejected by Allergan—by 7%. Both boosts increased the amount of cash in the proposed deal. The second increase came under pressure from Pershing Square.

Allergan has yet to respond to the increased offer. But Valeant and Pershing Square have apparently run out of patience: Valeant CEO Michael Pearson said the company plans to file an exchange offer with the Securities and Exchange Commission in the next several weeks, and a vote on Pershing Square’s proposal to replace six members of the company’s board could come as soon as Aug. 7.

The hedge fund did not say which six directors it would seek to remove, or whom it would propose be elected in their place.

Pershing Square chief William Ackman said he has the support of six shareholders representing nearly 20% of Allergan shares, and has met with holders of another 10%. He needs the support of 25% to force a special meeting to vote on the board’s fate.

Ackman said the change in tactics was designed both to appeal to shareholders, who feared the referendum would delay a special meeting, and to avoid triggering Allergan’s poison pill, announced after Pershing Square built its stake. “It’s not entirely clear if the poison pill applies to the referendum or not,” Ackman said yesterday.


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