Pershing Files Suit Against Allergan -- 2nd Update

By Anna Prior 

William Ackman's Pershing Square Capital Management L.P. has asked a Delaware court to confirm that its recent push for a special meeting of Allergan Inc. shareholders won't trigger the Botox maker's poison pill.

Pershing has called for a special meeting of Allergan shareholders in an effort to unseat six members of the board as part of its takeover attempt with Valeant Pharmaceuticals Inc.

A representative for Allergan didn't immediately respond to requests for comment.

The Botox maker has rebuffed the advances from Valeant and Pershing and earlier this week rejected the latest takeover bid, saying it substantially undervalues the company. Valeant boosted its offer for Allergan late last month to about $52.7 billion in cash and stock, partly thanks to Mr. Ackman's agreement to take a price cut on his own stake.

Pershing is Allergan's largest shareholder with a 9.7% stake.

Allergan's poison pill limits Pershing Square's stake to less than 10% and could restrict talks between investors. Mr. Ackman had sought confirmation from Allergan last week that its bid for a special meeting wouldn't violate the provisions of the plan but said he didn't get an adequate answer.

A poison pill, also known as a shareholder rights plan, is designed to dilute the value of the stock by flooding the market with additional shares, making it expensive for an investor to acquire a controlling stake.

"We regret that we were forced to file this lawsuit," said Mr. Ackman. "Allergan's failure to confirm that its poison pill does not apply to the actions taken in furtherance of calling a special meeting is a blatant attempt to frustrate shareholders' ability to express their vies and exercise their rights."

The suit was filed in the Delaware Court of Chancery.

Since Valeant's bid for Allergan was first disclosed in April, the companies have been engaged in a public war of words, and Allergan adopted a poison-pill defense saying if any unapproved investor acquires 10% or more of the company's stock, other stockholders will have the right to buy discounted shares.

Valeant criticized Allergan's management for spending too freely, particularly on research and development. Valeant, which has promised that it would cut the combined company's R&D spending by 69%, spends little on science, instead focusing on buying established drugs and treatments and welling them through its international network.

Allergan, meanwhile, has said Valeant's cost-cutting would threaten future sales growth and R&D, putting the company at risk. Allergan also questioned the stability of Valeant's business model.

Write to Anna Prior at [e-mail]

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