http://online.wsj.com/articles/allergan-defends-bylaws-amid-effort-to-resist-valeant-1406754833
Allergan Defends Bylaws Amid Effort to Resist Valeant
Botox Maker Faces Questions From ISS About Hurdles for Investors Seeking Special Meeting
By DAVID BENOIT And LIZ HOFFMAN CONNECT
July 30, 2014 5:13 p.m. ET
Allergan Inc. AGN +0.74% is defending corporate bylaws that have emerged as a flash point in its effort to ward off a $53 billion hostile takeover by Valeant Pharmaceuticals International Inc. VRX.T +2.36%
The Botox maker, in a closed-door meeting last week, faced questions about its bylaws from proxy advisory firm Institutional Shareholder Services Inc., according to people familiar with the matter. At ISS's Maryland headquarters, staff pressed Allergan about procedural hurdles it has laid out for investors who want to call a special meeting of shareholders, the people said.
ISS is looking at the issue because activist investor William Ackman, who has teamed with Canada-based Valeant to bid for Allergan, is urging shareholders to join him in a call for a special meeting. Mr. Ackman wants to remove a majority of the Irvine, Calif.-based company's board at such a meeting, in an effort to make way for a new Allergan board receptive to Valeant's bid.
ISS, whose endorsement can influence the actions of institutional shareholders, is expected to issue an opinion in the coming days, though it isn't expected to weigh in on the merits of Valeant's offer or whether six Allergan directors should be ousted, according to the people. Instead, its recommendation likely will focus on whether shareholders should demand the company call the special meeting.
ISS has sent signals to both sides it will weigh in on Allergan's rules for calling a special meeting, which Mr. Ackman has described as onerous. ISS met with representatives of Mr. Ackman's Pershing Square Capital Management LP the week before its meeting with Allergan. Pershing Square is an Allergan shareholder.
Allergan requires an investor to get support of 25% of shares for the company to call a special meeting. Its bylaws require shareholders who ask for such a meeting to fill out questionnaires; they are also required to continue to own their shares through the special meeting. Mr. Ackman's camp has said the rules could deter big mutual and pension funds from lending support to his cause.
Allergan and its advisers, concerned the company didn't adequately make its case in person, sent the proxy adviser a follow-up memo defending Allergan bylaws after the meeting, people familiar with the matter said. That memo was filed with regulators Tuesday, after ISS requested Allergan make it public, some of the people said.
In the memo, Allergan said it felt the bylaws were "reasonable," and pointed to other companies with similar rules. Allergan's memo said the rules were intended "to mitigate the risk that corporate efforts would be diverted to serve the narrow self-interests of a few minority stockholders."
Pershing Square sent ISS its own response to that memo, reiterating it believes the bylaws aren't reasonable, according to a copy of the response reviewed by The Wall Street Journal.
"This form represents a major step backward in terms of shareholder democracy," Pershing Square wrote.
ISS regularly asks tough questions and doesn't tell either side what it will say before its opinion is officially issued.
Allergan Defends Bylaws Amid Effort to Resist Valeant
Botox Maker Faces Questions From ISS About Hurdles for Investors Seeking Special Meeting
By DAVID BENOIT And LIZ HOFFMAN CONNECT
July 30, 2014 5:13 p.m. ET
Allergan Inc. AGN +0.74% is defending corporate bylaws that have emerged as a flash point in its effort to ward off a $53 billion hostile takeover by Valeant Pharmaceuticals International Inc. VRX.T +2.36%
The Botox maker, in a closed-door meeting last week, faced questions about its bylaws from proxy advisory firm Institutional Shareholder Services Inc., according to people familiar with the matter. At ISS's Maryland headquarters, staff pressed Allergan about procedural hurdles it has laid out for investors who want to call a special meeting of shareholders, the people said.
ISS is looking at the issue because activist investor William Ackman, who has teamed with Canada-based Valeant to bid for Allergan, is urging shareholders to join him in a call for a special meeting. Mr. Ackman wants to remove a majority of the Irvine, Calif.-based company's board at such a meeting, in an effort to make way for a new Allergan board receptive to Valeant's bid.
ISS, whose endorsement can influence the actions of institutional shareholders, is expected to issue an opinion in the coming days, though it isn't expected to weigh in on the merits of Valeant's offer or whether six Allergan directors should be ousted, according to the people. Instead, its recommendation likely will focus on whether shareholders should demand the company call the special meeting.
ISS has sent signals to both sides it will weigh in on Allergan's rules for calling a special meeting, which Mr. Ackman has described as onerous. ISS met with representatives of Mr. Ackman's Pershing Square Capital Management LP the week before its meeting with Allergan. Pershing Square is an Allergan shareholder.
Allergan requires an investor to get support of 25% of shares for the company to call a special meeting. Its bylaws require shareholders who ask for such a meeting to fill out questionnaires; they are also required to continue to own their shares through the special meeting. Mr. Ackman's camp has said the rules could deter big mutual and pension funds from lending support to his cause.
Allergan and its advisers, concerned the company didn't adequately make its case in person, sent the proxy adviser a follow-up memo defending Allergan bylaws after the meeting, people familiar with the matter said. That memo was filed with regulators Tuesday, after ISS requested Allergan make it public, some of the people said.
In the memo, Allergan said it felt the bylaws were "reasonable," and pointed to other companies with similar rules. Allergan's memo said the rules were intended "to mitigate the risk that corporate efforts would be diverted to serve the narrow self-interests of a few minority stockholders."
Pershing Square sent ISS its own response to that memo, reiterating it believes the bylaws aren't reasonable, according to a copy of the response reviewed by The Wall Street Journal.
"This form represents a major step backward in terms of shareholder democracy," Pershing Square wrote.
ISS regularly asks tough questions and doesn't tell either side what it will say before its opinion is officially issued.