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Allergan Files Lawsuit in Federal Court against Valeant and Pershing Square for Violations of Federal Securities Laws
IRVINE, Calif.--(BUSINESS WIRE)--Allergan, Inc. (NYSE: AGN) (“Allergan” or the “Company”) today filed a lawsuit in the United States District Court for the Central District of California against Valeant Pharmaceuticals International, Inc. (“Valeant”), Pershing Square Capital Management, L.P. (“Pershing Square”) and its principal, William A. Ackman, alleging that Valeant, Pershing Square and Mr. Ackman violated federal securities laws prohibiting insider trading, engaged in other fraudulent practices, and failed to disclose legally required information.
“We suspected at the time it would ultimately have to go directly to Allergan shareholders. We were correct.”
After careful consideration, Allergan decided to file the lawsuit in order to ensure that all of its stockholders have the opportunity to make decisions regarding their investment in the Company based on compliant, full and fair disclosures, and to ensure that any stockholders voting on corporate matters acquired their shares in accordance with the law. The Allergan Board of Directors is strongly committed to protecting the stockholder franchise and believes it is important that the rights of the Company’s stockholders not be infringed by the actions of one hedge fund that significantly profited (to the detriment of other stockholders and the market) by trading in Allergan securities while in possession of material non-public information regarding Allergan. Specifically, as the complaint alleges, between February 2014 and April 2014, Pershing Square purchased Allergan stock and securities then valued at over $3.2 billion from unknowing Company stockholders while fully aware of Valeant’s nonpublic takeover intentions, thereby securing for itself and depriving the selling stockholders of value appreciation worth approximately $1.2 billion upon Valeant’s announcement of its initial offer on April 22, 2014.
In its complaint, Allergan is seeking, among other remedies, a declaration from the court that Pershing Square and Valeant violated insider trading and disclosure laws, and an order rescinding Pershing Square’s purchase of the Allergan shares it acquired illegally. Allergan reserves the right to seek additional remedies against all appropriate parties.
Details of the Complaint
The complaint alleges that Valeant, Pershing Square and Mr. Ackman, violated Sections 13(d), 14(a), and 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which prohibit insider trading and require full and fair disclosure for stockholders in the context of proxy solicitations and tender offers, and the rules promulgated by the U.S. Securities and Exchange Commission (“SEC”) under those Sections, including Rule 14e-3.
The complaint alleges, among other things, that:
Valeant always directed the unsolicited transaction to acquire Allergan toward a tender offer. Valeant’s Chairman and Chief Executive Officer, J. Michael Pearson, confirmed the foregoing on June 17, 2014, when he said of Valeant’s initial proposal: “We suspected at the time it would ultimately have to go directly to Allergan shareholders. We were correct.”
Debt-laden Valeant did not have the resources to acquire Allergan, and therefore sought third-party financing assistance from Mr. Ackman and his hedge fund, Pershing Square, which are wholly separate persons from Valeant.
By the time Valeant and Pershing Square entered into their financing agreement, Valeant had taken what prior courts have held to be substantial steps toward a tender offer, including: (i) hiring financial and legal advisors, (ii) holding multiple board and committee meetings, and (iii) negotiating the respective financial commitments of the parties.
After Valeant shared its nonpublic takeover intentions with its third-party financier, and after taking these substantial steps toward a tender offer, an LLC entity formed and controlled entirely by Pershing Square – PS Fund 1, LLC – purchased significant amounts of Allergan stock and other securities using zero-strike price call options and equity forwards, without disclosing Valeant’s intentions to the market. As a result, the parties who sold such securities to PS Fund 1 were significantly damaged.
An examination of trading activity between February 2014 and April 2014 establishes that PS Fund 1, at the direction of Mr. Ackman and Pershing Square, was the sole purchaser of Allergan stock and other securities, and that Valeant purchased no shares of Allergan stock or other securities.
Valeant’s belated addition as a de minimis investor in PS Fund 1 does not change these facts. Indeed, by the time Valeant was added as a member of and contributed capital to PS Fund 1, the fund had already acquired more than 11 million Allergan shares or options.
The terms of the parties’ agreement and the parties’ subsequent actions make clear that Valeant, and not PS Fund 1, Pershing Square or Mr. Ackman, was and has continued to be the sole person seeking to acquire Allergan.
Mr. Ackman has repeatedly represented that he was simply “Allergan’s largest shareholder” interested in “maximiz[ing] value for all Allergan shareholders,” whether through a transaction with Valeant or by “identifying a superior transaction with another company.”
PS Fund 1’s rapid acquisition of a total of 9.7% of outstanding Allergan stock, while in possession of material nonpublic information, violated Rule 14e-3.
Valeant and Pershing Square’s construction of a shell entity through which to act, and their self-serving description of that relationship through which they have sought to mask these facts, does not and cannot legitimize their unlawful conduct.
Rule 14e-3, promulgated by the SEC under the Exchange Act, provides that, where any “offering person” has taken “a substantial step or steps” to commence a tender offer of a target company, any “other person” who is in possession of material nonpublic information relating to that tender offer is prohibited from purchasing or selling any securities of the target company, unless the information is publicly disclosed within a reasonable time prior to the purchase or sale. The complaint alleges that Valeant, who was and is the “offering person” within the meaning of this rule, took substantial steps to commence a tender offer for Allergan and tipped Mr. Ackman (and the entities he controls) – the “other person” within the meaning of this rule – to those otherwise undisclosed intentions, and that Mr. Ackman then traded in Allergan securities on the basis of this material, nonpublic information.
The complaint also alleges that in furtherance of their takeover efforts, Valeant and Pershing Square have:
Released demonstrably false and misleading proxy solicitation materials that misstate their relationship and intentions regarding a transaction; and
Repeatedly misstated the certainty of the proposed transaction and the value of the consideration being offered to Allergan stockholders, among other material facts – information that is critical to Allergan stockholders in considering whether to deliver consents in favor of a special stockholder meeting, and whether to tender their shares to Valeant in an exchange offer.
Allergan fully supports the rights of its stockholders to call a special meeting in accordance with the Company’s charter and bylaws, and therefore will seek expedition of the federal court’s decision so that the Company can quickly resolve this matter and continue focusing on delivering enhanced value to all of its stockholders.
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Allergan Files Lawsuit in Federal Court against Valeant and Pershing Square for Violations of Federal Securities Laws
IRVINE, Calif.--(BUSINESS WIRE)--Allergan, Inc. (NYSE: AGN) (“Allergan” or the “Company”) today filed a lawsuit in the United States District Court for the Central District of California against Valeant Pharmaceuticals International, Inc. (“Valeant”), Pershing Square Capital Management, L.P. (“Pershing Square”) and its principal, William A. Ackman, alleging that Valeant, Pershing Square and Mr. Ackman violated federal securities laws prohibiting insider trading, engaged in other fraudulent practices, and failed to disclose legally required information.
“We suspected at the time it would ultimately have to go directly to Allergan shareholders. We were correct.”
After careful consideration, Allergan decided to file the lawsuit in order to ensure that all of its stockholders have the opportunity to make decisions regarding their investment in the Company based on compliant, full and fair disclosures, and to ensure that any stockholders voting on corporate matters acquired their shares in accordance with the law. The Allergan Board of Directors is strongly committed to protecting the stockholder franchise and believes it is important that the rights of the Company’s stockholders not be infringed by the actions of one hedge fund that significantly profited (to the detriment of other stockholders and the market) by trading in Allergan securities while in possession of material non-public information regarding Allergan. Specifically, as the complaint alleges, between February 2014 and April 2014, Pershing Square purchased Allergan stock and securities then valued at over $3.2 billion from unknowing Company stockholders while fully aware of Valeant’s nonpublic takeover intentions, thereby securing for itself and depriving the selling stockholders of value appreciation worth approximately $1.2 billion upon Valeant’s announcement of its initial offer on April 22, 2014.
In its complaint, Allergan is seeking, among other remedies, a declaration from the court that Pershing Square and Valeant violated insider trading and disclosure laws, and an order rescinding Pershing Square’s purchase of the Allergan shares it acquired illegally. Allergan reserves the right to seek additional remedies against all appropriate parties.
Details of the Complaint
The complaint alleges that Valeant, Pershing Square and Mr. Ackman, violated Sections 13(d), 14(a), and 14(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which prohibit insider trading and require full and fair disclosure for stockholders in the context of proxy solicitations and tender offers, and the rules promulgated by the U.S. Securities and Exchange Commission (“SEC”) under those Sections, including Rule 14e-3.
The complaint alleges, among other things, that:
Valeant always directed the unsolicited transaction to acquire Allergan toward a tender offer. Valeant’s Chairman and Chief Executive Officer, J. Michael Pearson, confirmed the foregoing on June 17, 2014, when he said of Valeant’s initial proposal: “We suspected at the time it would ultimately have to go directly to Allergan shareholders. We were correct.”
Debt-laden Valeant did not have the resources to acquire Allergan, and therefore sought third-party financing assistance from Mr. Ackman and his hedge fund, Pershing Square, which are wholly separate persons from Valeant.
By the time Valeant and Pershing Square entered into their financing agreement, Valeant had taken what prior courts have held to be substantial steps toward a tender offer, including: (i) hiring financial and legal advisors, (ii) holding multiple board and committee meetings, and (iii) negotiating the respective financial commitments of the parties.
After Valeant shared its nonpublic takeover intentions with its third-party financier, and after taking these substantial steps toward a tender offer, an LLC entity formed and controlled entirely by Pershing Square – PS Fund 1, LLC – purchased significant amounts of Allergan stock and other securities using zero-strike price call options and equity forwards, without disclosing Valeant’s intentions to the market. As a result, the parties who sold such securities to PS Fund 1 were significantly damaged.
An examination of trading activity between February 2014 and April 2014 establishes that PS Fund 1, at the direction of Mr. Ackman and Pershing Square, was the sole purchaser of Allergan stock and other securities, and that Valeant purchased no shares of Allergan stock or other securities.
Valeant’s belated addition as a de minimis investor in PS Fund 1 does not change these facts. Indeed, by the time Valeant was added as a member of and contributed capital to PS Fund 1, the fund had already acquired more than 11 million Allergan shares or options.
The terms of the parties’ agreement and the parties’ subsequent actions make clear that Valeant, and not PS Fund 1, Pershing Square or Mr. Ackman, was and has continued to be the sole person seeking to acquire Allergan.
Mr. Ackman has repeatedly represented that he was simply “Allergan’s largest shareholder” interested in “maximiz[ing] value for all Allergan shareholders,” whether through a transaction with Valeant or by “identifying a superior transaction with another company.”
PS Fund 1’s rapid acquisition of a total of 9.7% of outstanding Allergan stock, while in possession of material nonpublic information, violated Rule 14e-3.
Valeant and Pershing Square’s construction of a shell entity through which to act, and their self-serving description of that relationship through which they have sought to mask these facts, does not and cannot legitimize their unlawful conduct.
Rule 14e-3, promulgated by the SEC under the Exchange Act, provides that, where any “offering person” has taken “a substantial step or steps” to commence a tender offer of a target company, any “other person” who is in possession of material nonpublic information relating to that tender offer is prohibited from purchasing or selling any securities of the target company, unless the information is publicly disclosed within a reasonable time prior to the purchase or sale. The complaint alleges that Valeant, who was and is the “offering person” within the meaning of this rule, took substantial steps to commence a tender offer for Allergan and tipped Mr. Ackman (and the entities he controls) – the “other person” within the meaning of this rule – to those otherwise undisclosed intentions, and that Mr. Ackman then traded in Allergan securities on the basis of this material, nonpublic information.
The complaint also alleges that in furtherance of their takeover efforts, Valeant and Pershing Square have:
Released demonstrably false and misleading proxy solicitation materials that misstate their relationship and intentions regarding a transaction; and
Repeatedly misstated the certainty of the proposed transaction and the value of the consideration being offered to Allergan stockholders, among other material facts – information that is critical to Allergan stockholders in considering whether to deliver consents in favor of a special stockholder meeting, and whether to tender their shares to Valeant in an exchange offer.
Allergan fully supports the rights of its stockholders to call a special meeting in accordance with the Company’s charter and bylaws, and therefore will seek expedition of the federal court’s decision so that the Company can quickly resolve this matter and continue focusing on delivering enhanced value to all of its stockholders.
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