If Allergan’s insider trading and disclosure suit against the hostile bidders Valeant and Pershing Square is a bluff, Pershing just called it.
William Ackman’s hedge fund dumped a pile of documents that Allergan complained it had improperly withheld on the Securities and Exchange Commission on Wednesday, including Pershing’s original confidentiality agreements with the Canadian drug company Valeant, as well as the share call option and forward contracts in which the hedge fund acquired its 9.7 percent stake in Allergan.
Pershing and Valeant also filed a brief in federal court in Santa Ana, California, agreeing to expedited discovery so it can dispose quickly of Allergan’s claims. The brief, signed by Kirkland & Ellis for Pershing and Sullivan & Cromwell for Valeant, is actually styled as an opposition to a motion to expedite by Allergan’s lawyers at Latham & Watkins and Wachtell, Lipton, Rosen & Katz. But after accusing Allergan of suing to impede shareholders from calling for a special meeting to oust directors, Pershing and Valeant said they’re raring to defend themselves against Allergan’s accusations.
These quick responses to Allergan’s complaint seem intended to assure Allergan shareholders that Pershing and Valeant have nothing to hide. Those shareholders, of course, are considering whether to throw in with Pershing and demand that the Allergan board convene a special shareholder meeting – a suicide mission because the purpose of the meeting would be to oust Allergan directors. (Pershing and Valeant need to replace enough current board members to undo the company’s recently adopted poison pill, which precludes Pershing from acquiring a bigger Allergan stake.) The proxy advisory services ISS and Glass Lewis this week advised shareholders to join up with Pershing, which has to amass written consents from 25 percent of Allergan shareholders in order to demand the meeting.
Allergan’s primary goal right now, based on its Aug. 4 motion to expedite the California case, is to make sure that the special meeting doesn’t take place. It can do that in two ways: by raising sufficient doubts about Valeant and Pershing to dissuade shareholders from joining Pershing’s call for the meeting; or by obtaining a ruling that Valeant and Pershing really did violate securities laws. A judgment against the hostile bidders, Allergan said in its brief, would empower the board to refuse to convene a special shareholder meeting. It would also spell the end of Valeant’s tender offer and remove a drag on Allergan’s share price, the brief said.