Judge Won’t Block Pershing Square From Voting Allergan Shares

Nov 5 2014 | 2:53pm ET

A federal judge has found that Pershing Square Capital Management’s unusual partnership with Valeant Pharmaceuticals International in the latter’s pursuit of Allergan Inc. may have violated securities laws, but refused to disenfranchise the activist hedge fund in an upcoming vote on Allergan’s future.

U.S. District Judge David Carter said the arrangement between Pershing Square and Valeant raised “serious questions” and may be, as Allergan alleges, a violation of federal insider-trading laws. But he refused Allergan’s request that he block Pershing Square from voting at next month’s special meeting, when the hedge fund hopes to oust a majority of Allergan’s board and force the acceptance of Valeant’s $53 billion offer.

“Although there is something inherently appealing about preventing someone who may have violated the securities laws from using their allegedly wrongfully-acquired shares to carry out their ultimate plan… this court does not believe such an injunction is appropriate at this time and in this case,” Carter wrote.

Pershing Square is Allergan’s largest shareholder, with a 9.7% stake.

“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,” Valeant CEO Michael Pearson said.

Carter did order Pershing Square and Valeant to correct their proxy solicitation disclosures to identify both as “co-bidders,” and barred the hedge fund from soliciting any more proxies until he has reviewed and approved the changes by Friday.

Pershing Square said it would “promptly supplement its proxy statement disclosure in the manner determined by the court.”

Allergan said it would appeal, but was cheered by the judge’s finding of potential merit in their insider-trading claims. According to The Wall Street Journal, the Botox-maker hopes that Carter’s ruling will push the Securities and Exchange Commission into action before the Dec. 18 vote.

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