Glossary of Hostile Takeover Terms with Discussion
- Thread starter Shoham
- Start date
Hi Dan,
Great read and very informative. It should be interesting to watch how this case plays out.
Thanks !
Great read and very informative. It should be interesting to watch how this case plays out.
Thanks !
- Shoham Aug 09, 2014 at 12:14: PM
Shoham
Member
Law Suit Update
Update on the status of the law suit:
The lawsuit alleges Insider Trading (see prior post), arguing that Pershing Square (PS) is a separate entity from Valeant and was told by Valeant about the planned hostile takeover. Allergan asked the judge to start the trial quickly (Motion to Expedite), and to not even wait to hear the views of the other side ("Ex Parte") before deciding to expedite.
Since just about everyone on both sides, myself included, considers delay to be in Allergan's interests, asking for speed is interpreted as just for show. Allergan wants to have an argument to counter assertions that the lawsuit is nothing but a delay tactic. Whether the lawsuit will produce any benefits to Allergan beyond delay tactic is unknown since we are on unexplored legal territory.
Earlier this week, PS-Valeant responded to the Ex Parte Expedite Motion. While the response is not to the overall allegation of insider trading, they provided an outline of their defense by way of framing the issue. Their defense is that all those PS-Valeant structures and Assertions that Allergan claims are shams designed to masquerade insider trading are for real, and that Allergan acknowledged as much in their own SEC filings when referring to PS and Valeant as "co-bidders." Furthermore, the sole purpose of the suit, PS claims, is to frustrate and delay the shareholders' right for a special meeting to remove the "entrenched" board.
On the (for now) germane topic of Ex Parte Expedite Motion, PS makes persuasive counterarguments -- saying that Allergan has no right to claim a timing emergency (the required ground for expediting anything, particularly on an Ex Parte basis), after they just sat for 4 months with no new information waiting until a special shareholder meeting is about to be called before filing a delay-tactics lawsuit. But then PS mooted their entire argument by saying that actually they have no objections to expediting.
So PS filed a 14 page legal brief where they could have just said "no objection to expedite."
In any event, the Judge set August 20th (2 weeks) for a hearing just on the motion to expedite. Not a whole lot will happen at the hearing. Allergan will ask for an expedited trial. PS will say that Allergan is just pretending to want speed, but will soon enough start creating a never-ending chain of delay tactics (this way, whenever Allergan introduces a new issue or ask for a new process, PS will say -- "see we told you: DELAY TACTICS"). PS will say that they are fine with any schedule that is convenient to the court (when the other side is already asking for what you want, you just play the easy-going "whatever is convenient for the court" card). The two sides will interject some "framing language" about the overall case, but that's not the main point today; so if someone gets too long-winded the judge will cut them off. At some point, maybe as early as this hearing, PS will ask the judge to throw the whole suit out; but it is unlikely that such will be granted during a hearing on timing matters only. While the judge may set the calender from the bench, I think he will issue his decision a few days later (since he would probably have to consult his schedule with other suits).
On a side-issue: In routine hostile-takeover-defense lawsuits, the core allegation is some disclosure failures framed as a huge fraud. The standard response is for the offender to immediately file with the SEC something like "We were accused of not disclosing BLAH, we don't think we were required to disclose BLAH, but nonetheless we are hereby disclosing BLAH anyway" (of course, all this after BLAH was already published in the other side's legal complaint). Then, when they go to the first hearing, they say that the matter is moot and the case is closed (unless the other side can show that they were actually -- not just theoretically -- damaged by the disclosure delay). PS is posturing that this is just another such routine lawsuit (Insider Trading, at it's core, is, in fact, a failure to disclose issue; but unlike the routine cases, it is, in fact, also a huge fraud; with real people losing real money). True to such posturing, PS filed BLAH with the SEC.
Dan.
Update on the status of the law suit:
The lawsuit alleges Insider Trading (see prior post), arguing that Pershing Square (PS) is a separate entity from Valeant and was told by Valeant about the planned hostile takeover. Allergan asked the judge to start the trial quickly (Motion to Expedite), and to not even wait to hear the views of the other side ("Ex Parte") before deciding to expedite.
Since just about everyone on both sides, myself included, considers delay to be in Allergan's interests, asking for speed is interpreted as just for show. Allergan wants to have an argument to counter assertions that the lawsuit is nothing but a delay tactic. Whether the lawsuit will produce any benefits to Allergan beyond delay tactic is unknown since we are on unexplored legal territory.
Earlier this week, PS-Valeant responded to the Ex Parte Expedite Motion. While the response is not to the overall allegation of insider trading, they provided an outline of their defense by way of framing the issue. Their defense is that all those PS-Valeant structures and Assertions that Allergan claims are shams designed to masquerade insider trading are for real, and that Allergan acknowledged as much in their own SEC filings when referring to PS and Valeant as "co-bidders." Furthermore, the sole purpose of the suit, PS claims, is to frustrate and delay the shareholders' right for a special meeting to remove the "entrenched" board.
On the (for now) germane topic of Ex Parte Expedite Motion, PS makes persuasive counterarguments -- saying that Allergan has no right to claim a timing emergency (the required ground for expediting anything, particularly on an Ex Parte basis), after they just sat for 4 months with no new information waiting until a special shareholder meeting is about to be called before filing a delay-tactics lawsuit. But then PS mooted their entire argument by saying that actually they have no objections to expediting.
So PS filed a 14 page legal brief where they could have just said "no objection to expedite."
In any event, the Judge set August 20th (2 weeks) for a hearing just on the motion to expedite. Not a whole lot will happen at the hearing. Allergan will ask for an expedited trial. PS will say that Allergan is just pretending to want speed, but will soon enough start creating a never-ending chain of delay tactics (this way, whenever Allergan introduces a new issue or ask for a new process, PS will say -- "see we told you: DELAY TACTICS"). PS will say that they are fine with any schedule that is convenient to the court (when the other side is already asking for what you want, you just play the easy-going "whatever is convenient for the court" card). The two sides will interject some "framing language" about the overall case, but that's not the main point today; so if someone gets too long-winded the judge will cut them off. At some point, maybe as early as this hearing, PS will ask the judge to throw the whole suit out; but it is unlikely that such will be granted during a hearing on timing matters only. While the judge may set the calender from the bench, I think he will issue his decision a few days later (since he would probably have to consult his schedule with other suits).
On a side-issue: In routine hostile-takeover-defense lawsuits, the core allegation is some disclosure failures framed as a huge fraud. The standard response is for the offender to immediately file with the SEC something like "We were accused of not disclosing BLAH, we don't think we were required to disclose BLAH, but nonetheless we are hereby disclosing BLAH anyway" (of course, all this after BLAH was already published in the other side's legal complaint). Then, when they go to the first hearing, they say that the matter is moot and the case is closed (unless the other side can show that they were actually -- not just theoretically -- damaged by the disclosure delay). PS is posturing that this is just another such routine lawsuit (Insider Trading, at it's core, is, in fact, a failure to disclose issue; but unlike the routine cases, it is, in fact, also a huge fraud; with real people losing real money). True to such posturing, PS filed BLAH with the SEC.
Dan.
Dan, wish I had professors like you back in college! Thanks for the info!
Hi Dan
What does this mean? Is it something to be concerned about or just routine in M&A?
12:51 pm Allergan receives second request from Federal Trade Commission regarding Valeant's (VRX) unsolicited acquisition proposal (AGN) : Co announced that it received a request for additional information under the Hart-Scott-Rodino Act from the U.S. Federal Trade Commission in connection with Valeant Pharmaceuticals International, Inc.'s (VRX) unsolicited acquisition proposal of Allergan.
What does this mean? Is it something to be concerned about or just routine in M&A?
12:51 pm Allergan receives second request from Federal Trade Commission regarding Valeant's (VRX) unsolicited acquisition proposal (AGN) : Co announced that it received a request for additional information under the Hart-Scott-Rodino Act from the U.S. Federal Trade Commission in connection with Valeant Pharmaceuticals International, Inc.'s (VRX) unsolicited acquisition proposal of Allergan.
- Shoham Aug 12, 2014 at 01:02: AM
Shoham
Member
So far, not even a speed bump; but could become more substantial later. For those who would rather not see this merger happening, this is (a very small bit of) good news.
As a routine M&A matter, the Federal Trade Commission (FTC), examines all major mergers to see if they reduce marketplace competition (and some other issues, but anti-competitiveness is the main concern). While the FTC may outright block a transaction, more commonly they require the merged entity to divest competing products. Merging companies often divest such before even starting the process.
In the Nestle transaction, Valeant divested some Allergan-competing products and implied that this should suffice for the FTC. Apparently, the FTC is not quite ready to clear out of the way. They asked both Valeant and Allergan to provide more information.
As this is a hostile situation, expect Valeant to quickly respond with detailed explanation arguing that there is no problem (and, potentially, promise to divest additional products once the merger completes); and expect Allergan to take the maximum time allowed and respond with the opposite agenda. In any event, Valeant and its allies need to gain control of the Allergan Board to win this takeover battle, and if they do, then the new (pro-merger) board will respond to the FTC with a similar line as Valeant.
Once Allergan and Valeant responded to the FTC information request, the FTC has 30 days to approve or block (the merger can't happen before the 30 days expire). If the FTC says nothing, it's the same as approving. Since the various other delay mechanisms already in place (shareholder meeting delay, insider trading lawsuit delay, etc.) are on much longer time scales, unless this FTC action is the harbinger of future issues, I don't expect this to add to any of the timelines -- so not even a speed bump.
Even if the FTC does decide to intervene, it will probably be no more than extracting some promises out of Valeant as a condition to approve (not likely a huge deal, but every such promise or divestiture reduces the profitability of the deal and therefore the likelihood it will happen).
The FTC has been under political pressure to scrutinize this transaction, and may yet select to play a more assertive role. For now, if I may conjecture some motivations, the FTC is doing the minimum they can without tipping their hand. They are neither giving the all-clear, nor blocking or slowing the transaction. This way, if the transaction fails on it's own, they would have skirted this minefield without enraging either side. If it doesn't, then, at some point, the FTC will have to decide if they want to interfere or stay clear.
Dan.
Thanks, Dan
Question - it seems like Valeant is under a lot of pressure right now with the market and their shareholders...this can't be going well.
Is anything you're reading now (Value Act etc) the potential beginning of the retreat to higher grounds. And if they did retreat - what happens with ackman as well as the tender offers.
A feeling i have is that they can't do this forever so when ackman gets his 25% either they will increase their offer or walk away, promising to come back when Bill figures out the board
What are your thoughts on how Valeant can survive current conditions versus walk temporarily etc
Question - it seems like Valeant is under a lot of pressure right now with the market and their shareholders...this can't be going well.
Is anything you're reading now (Value Act etc) the potential beginning of the retreat to higher grounds. And if they did retreat - what happens with ackman as well as the tender offers.
A feeling i have is that they can't do this forever so when ackman gets his 25% either they will increase their offer or walk away, promising to come back when Bill figures out the board
What are your thoughts on how Valeant can survive current conditions versus walk temporarily etc
- Shoham Aug 12, 2014 at 10:08: AM
Shoham
Member
As detailed in my prior thread ("When the company is doing well, management is in control, when not, the investors are"), I don't think this merger will happen. Whether, or when, anyone can see the beginning of the end of this deal, is a matter for conjecture -- something I leave for the professional Wall Street class.
The basic alignment of power is largely as it has been all along: Valeant has largely played all their cards, and are slowly progressing through their steps (although they haven'y even reached first base -- gathering 25% to call a special meeting), whereas Allergan has been keeping Valeant off balance with "soft powers" (Doctor letters, media barrage, political attention, lawsuit, etc.) only and still have a lot of "hard power" (acquisitions, stock buyback, etc.) available.
In the meantime, delays work for Allergan favor. With each passing quarterly report, Allergan is improving earnings and outlook (it has a lot of stored power, from years of being unchallenged, that it can release); while Valeant is reducing guidance (it has a lot of skeletons that are meant to be glossed over by frequent acquisitions). The short-term momentum investors (who normally like Valeant) are at risk of losing patience. Non-shareholder constituencies (doctors, politicians, regulators, media, courts) are making their voices heard. And, generally, the "sweet-spot timing" of the deal is being spoiled.
We may have already seen some of the "sweet-spot timing" spoilage: A key ingredient of the Valeant deal structure is the ability to finance the cash portion with Junk bonds, taking advantage of historically low interest rates. Well, last week has seen global sharp drops in junk bonds, and a corresponding increase in (junk bonds) interest rates. This damages the profitability and prospects of the deal, and Valeant's ability to offer any more cash.
Dan.
What does this mean in terms of the takeover with the court ruling?
"Judge David Carter said the U.S. District Court for the Central District of California "would be reluctant to create a precedent that allows corporations to demand at will the immediate attention and input of the federal courts in order to resolve intra-corporate disputes that might be better left to the dynamic free market or to the state court."
"But on Thursday, a judge ruled against expediting Allergan’s case against Valeant, and declined to state that the special meeting could not proceed while the litigation is pending. Instead, the judge in the case essentially punted the issue to Delaware, saying that Allergan’s bylaws didn’t make it clear that a special meeting could not be held before a case is resolved."
"Judge David Carter said the U.S. District Court for the Central District of California "would be reluctant to create a precedent that allows corporations to demand at will the immediate attention and input of the federal courts in order to resolve intra-corporate disputes that might be better left to the dynamic free market or to the state court."
"But on Thursday, a judge ruled against expediting Allergan’s case against Valeant, and declined to state that the special meeting could not proceed while the litigation is pending. Instead, the judge in the case essentially punted the issue to Delaware, saying that Allergan’s bylaws didn’t make it clear that a special meeting could not be held before a case is resolved."
means Allergan cant hold off the special meeting request from Ackman just because
they have a suit pending...the delaying tactic failed and the word in the press is Ackman and his hedgies have 30% shares to request the meeting....should be called soon
they have a suit pending...the delaying tactic failed and the word in the press is Ackman and his hedgies have 30% shares to request the meeting....should be called soon
means Allergan cant hold off the special meeting request from Ackman just because
they have a suit pending...the delaying tactic failed and the word in the press is Ackman and his hedgies have 30% shares to request the meeting....should be called soon
they have a suit pending...the delaying tactic failed and the word in the press is Ackman and his hedgies have 30% shares to request the meeting....should be called soon
intern ... you are wrong
hon. judge said "allergan by laws are not clear on this issue" and hence declined to state anything against allergan. he left that interpretation to be made by state court (delaware)
allergan will wait for delaware lawsuit to be completed while allergan will continue to fight insider trading lawsuit in california
plus by laws clearly state that till matters is sub judice those shares will not be taken into consideration for calling special meeting
assman fails again
- Shoham Aug 22, 2014 at 02:12: AM
Shoham
Member
Motion to Expedite Denied
I had a chance to read the judge's ruling (7 pages). I think Allergan got a better ruling than they could have wished for, but have to pretend that this is a setback. I'll explain:
You may recall, from my earlier post on the motion to expedite (2 weeks ago), that I said "Since just about everyone on both sides, myself included, considers delay to be in Allergan's interests, asking for speed is interpreted as just for show. Allergan wants to have an argument to counter assertions that the lawsuit is nothing but a delay tactic. Whether the lawsuit will produce any benefits to Allergan beyond delay tactic is unknown since we are on unexplored legal territory."
Basically, Allergan wants this to be bottled up in court for years and years; but has to keep up appearance of not trying to stall a special shareholder meeting (which hasn't even been called yet). So it asked the judge to expedite, using some sanctimonious language about how they don't want to hold up the potential special meeting (when everyone knows they really want exactly the opposite). PS/Valeant, in their response, dinged Allergan for claiming a timing emergency after sitting on the evidence for 4 months, but then simply turned around and said that actually they have no objection to expedition (in their case, they would love to have it expedited -- the sooner stuff gets cleared off the docket, the less roadblocks to the deal).
While I wasn't ready to handicap the expedite decision, I mildly expected the judge to grant the motion to expedite: After all, it's what both sides are asking for (even if, in Allergan's case, disingenuously). By not granting the motion, he is giving Allergan more delay than Allergan was able to ask for.
I have to respectfully disagree with headlines I've seen in the press over the past hours, saying that the suit won't delay the special meeting -- there is absolutely nothing in the judge's ruling that could possibly be interpreted that way! Whether the special meeting will, or will not, be delayed because of this suit will be determined by the Delaware Chancery court; but if it is delayed, the delay will now be years rather than months.
To play out the sequence of events to unfold:
1. PS will claim to have gotten 25% of the shares signing on and asks for a special shareholders' meeting.
2. Allergan says that the proxy is void since the requester (PS) is in violation of Insider Trading rules (even if he has enough shares excluding his own, to reach 25%).
3. PS sues in Delaware Chancery, saying that Allergan has no right to stop a perfectly good proxy.
This is where the real battle will be fought. With the determination of the legality of PS shares in prolonged limbo (now that there is no expedite), the Chancery court will be in a tough position. They won't want to usurp the Federal court's role determining if PS engaged in Insider Trading (much as they hate it's slowness), but they also won't want to create a situation where the perpetrator of Insider Trading is able to enjoy the fruits of their fraud and moot justice to the victims. By allowing the special meeting to proceed, the Chancery court may well allow PS to gain control of Allergan, using questionable shares, and then shut down the lawsuit denying justice to the victims. Conversely, by allowing Allergan to block the special meeting, when there is the potential that PS will be cleared by the Federal court, they would have denied an innocent shareholder the right to one of the benefit of their shares (the right to call a special meeting).
In that battle, Allergan's card will be that the takeover of Allergan by PS using fraudulently obtained shares is more irreparable than a delay in a special shareholder meeting. If this argument carries with Chancery, and there is no special meeting until the Federal court clears PS, then PS would have really wished the Expedite motion was granted. Even if the argument fails, Allergan will have a few backups (in addition to appeals). The first backup will be to go right back to judge Carter (who effectively invited them to come back once the special meeting is called) and again ask to expedite (which will make it easier for the Chancery court to wait for the Federal court), giving this exact "more irreparable harm" argument a second shot.
CORRECTION: In my earlier post I referred to the Chancery court as Federal (twice! in fact); I don't know how that happened. I always proofread my own posts before pressing "submit," so I can't figure how I made that error in the first place and then how missed it on the proofread. The Chancery Court is, of course, a Delaware State Court.
Dan.
On an Unrelated Matter: I overheard that the Epidemiology group at Allergan is all being laid off. I don't know much about Epidemiology, but I understand that it is mostly a statistical science. It so happens that my own team (I'm in another industry, more related to finance) has two current full time openings in Irvine (and potentially two more shortly) for individuals with strong statistics background. I won't take much more space here, but if you are, or know anyone in that group, have them look me up in LinkedIn. I'll accept any link request from any Allergan employee.
I had a chance to read the judge's ruling (7 pages). I think Allergan got a better ruling than they could have wished for, but have to pretend that this is a setback. I'll explain:
You may recall, from my earlier post on the motion to expedite (2 weeks ago), that I said "Since just about everyone on both sides, myself included, considers delay to be in Allergan's interests, asking for speed is interpreted as just for show. Allergan wants to have an argument to counter assertions that the lawsuit is nothing but a delay tactic. Whether the lawsuit will produce any benefits to Allergan beyond delay tactic is unknown since we are on unexplored legal territory."
Basically, Allergan wants this to be bottled up in court for years and years; but has to keep up appearance of not trying to stall a special shareholder meeting (which hasn't even been called yet). So it asked the judge to expedite, using some sanctimonious language about how they don't want to hold up the potential special meeting (when everyone knows they really want exactly the opposite). PS/Valeant, in their response, dinged Allergan for claiming a timing emergency after sitting on the evidence for 4 months, but then simply turned around and said that actually they have no objection to expedition (in their case, they would love to have it expedited -- the sooner stuff gets cleared off the docket, the less roadblocks to the deal).
While I wasn't ready to handicap the expedite decision, I mildly expected the judge to grant the motion to expedite: After all, it's what both sides are asking for (even if, in Allergan's case, disingenuously). By not granting the motion, he is giving Allergan more delay than Allergan was able to ask for.
I have to respectfully disagree with headlines I've seen in the press over the past hours, saying that the suit won't delay the special meeting -- there is absolutely nothing in the judge's ruling that could possibly be interpreted that way! Whether the special meeting will, or will not, be delayed because of this suit will be determined by the Delaware Chancery court; but if it is delayed, the delay will now be years rather than months.
To play out the sequence of events to unfold:
1. PS will claim to have gotten 25% of the shares signing on and asks for a special shareholders' meeting.
2. Allergan says that the proxy is void since the requester (PS) is in violation of Insider Trading rules (even if he has enough shares excluding his own, to reach 25%).
3. PS sues in Delaware Chancery, saying that Allergan has no right to stop a perfectly good proxy.
This is where the real battle will be fought. With the determination of the legality of PS shares in prolonged limbo (now that there is no expedite), the Chancery court will be in a tough position. They won't want to usurp the Federal court's role determining if PS engaged in Insider Trading (much as they hate it's slowness), but they also won't want to create a situation where the perpetrator of Insider Trading is able to enjoy the fruits of their fraud and moot justice to the victims. By allowing the special meeting to proceed, the Chancery court may well allow PS to gain control of Allergan, using questionable shares, and then shut down the lawsuit denying justice to the victims. Conversely, by allowing Allergan to block the special meeting, when there is the potential that PS will be cleared by the Federal court, they would have denied an innocent shareholder the right to one of the benefit of their shares (the right to call a special meeting).
In that battle, Allergan's card will be that the takeover of Allergan by PS using fraudulently obtained shares is more irreparable than a delay in a special shareholder meeting. If this argument carries with Chancery, and there is no special meeting until the Federal court clears PS, then PS would have really wished the Expedite motion was granted. Even if the argument fails, Allergan will have a few backups (in addition to appeals). The first backup will be to go right back to judge Carter (who effectively invited them to come back once the special meeting is called) and again ask to expedite (which will make it easier for the Chancery court to wait for the Federal court), giving this exact "more irreparable harm" argument a second shot.
CORRECTION: In my earlier post I referred to the Chancery court as Federal (twice! in fact); I don't know how that happened. I always proofread my own posts before pressing "submit," so I can't figure how I made that error in the first place and then how missed it on the proofread. The Chancery Court is, of course, a Delaware State Court.
Dan.
On an Unrelated Matter: I overheard that the Epidemiology group at Allergan is all being laid off. I don't know much about Epidemiology, but I understand that it is mostly a statistical science. It so happens that my own team (I'm in another industry, more related to finance) has two current full time openings in Irvine (and potentially two more shortly) for individuals with strong statistics background. I won't take much more space here, but if you are, or know anyone in that group, have them look me up in LinkedIn. I'll accept any link request from any Allergan employee.
Dan,
In this period of confusion, stress and uncertainty, your informative posts are a lifesaver. We hope you realize how truly we appreciate your in depth analysis. This is the only detailed and sensible analysis of the situation I have read so far.
It is so frustrating to read media reports simply repeating the same stories and headlines with no thought behind the reports. And these people get good money for making these reports.
In this period of confusion, stress and uncertainty, your informative posts are a lifesaver. We hope you realize how truly we appreciate your in depth analysis. This is the only detailed and sensible analysis of the situation I have read so far.
It is so frustrating to read media reports simply repeating the same stories and headlines with no thought behind the reports. And these people get good money for making these reports.
thank you Dan. poster # 35 pretty much summed up my appreciation for your informative posts.
- Shoham Aug 22, 2014 at 09:53: AM
Shoham
Member
For the filed complaint: http://www.scribd.com/doc/235639031/Allergan-Lawsuit
For the Judge's order: http://www.scribd.com/doc/237446159/California-Court-Order-on-Valeant-Allergan-Case
Dan.
- Shoham Aug 24, 2014 at 05:45: PM
Shoham
Member
What Allergan Could Have Done Differently
From another thread:
Hi.
I don't read every thread, so it's probably best, if you want me to comment, to post to this thread (I get an email notification whenever someone posts there).
To the main question:
I'm not seeing this as the end, or even the start of the end. V+PS have finally reached first base, and have taken a lot longer, paid a vastly higher price, and arrived with much less momentum than planned. Home base, is still far away, and no one knows if it is within reach.
Two months ago, PS claimed that they are days away from submitting the Special Meeting request with over 40% of the shares. They have since been saying loudly that it's taking longer (and that the share count is lower) because the paperwork for the special meeting is so complicated (GET REAL! The meeting request came from a total of 35 shareholders, representing 31% of the shares. Excluding PS, that's 34 shareholders representing 21% of the shares, or about $300M worth of shares each. These are not some average widows and orphans shareholders, but large institutional investors with teams of staff lawyers each. If they want to, they can fill out forms quickly and correctly; even very complex forms -- and, besides, didn't PS read the Allergan Bylaws before they started this whole effort?). The fact that Ackman's own shares (which are subject to Insider Trading litigation) are required to reach the 25% count means that it will be very hard for him to convince the courts to let him hold the meeting before the Insider Trading issue is resolved -- which could take years.
Readers of this thread already know my view (see "When the company is doing well, management is in control, when not, investors are" post) that this merger won't happen because there is no value creation in the merger (at least not to Allergan's shareholders).
Readers of this thread also know my general description of "Soft Powers" (doctor letters, media barrage, investor presentations, politician involvement, regulators attention, lawsuits, and other actions that do not involve any changes to the company or it's capitalization) and "Hard Powers" (restructuring, borrowing, shares buyback, acquisitions, shares buyback, management buyout, etc.). Valeant never had much Soft Power to begin with (PS has a little bit of Soft Power -- being that Ackman is somewhat of a media personality, and PS is certainly a highly litigious hedge fund), and have used up every last ounce of Hard Power at their disposal to make this bid. Allergan, thus far, have managed to keep V+PS off balance almost entirely with Soft Power. It has made one Hard Power move (the restructuring), and is now in position to immediately make some major additional moves. (Technically, the LiRIS license deal is also a Hard Power move; but it is too small to make a dramatic difference by itself).
So, to answer the original question: What Allergan has been doing is more likely, in my view, to prevail than not to; so I wouldn't go around second-guessing.
Dan.
From another thread:
Hi.
I don't read every thread, so it's probably best, if you want me to comment, to post to this thread (I get an email notification whenever someone posts there).
To the main question:
I'm not seeing this as the end, or even the start of the end. V+PS have finally reached first base, and have taken a lot longer, paid a vastly higher price, and arrived with much less momentum than planned. Home base, is still far away, and no one knows if it is within reach.
Two months ago, PS claimed that they are days away from submitting the Special Meeting request with over 40% of the shares. They have since been saying loudly that it's taking longer (and that the share count is lower) because the paperwork for the special meeting is so complicated (GET REAL! The meeting request came from a total of 35 shareholders, representing 31% of the shares. Excluding PS, that's 34 shareholders representing 21% of the shares, or about $300M worth of shares each. These are not some average widows and orphans shareholders, but large institutional investors with teams of staff lawyers each. If they want to, they can fill out forms quickly and correctly; even very complex forms -- and, besides, didn't PS read the Allergan Bylaws before they started this whole effort?). The fact that Ackman's own shares (which are subject to Insider Trading litigation) are required to reach the 25% count means that it will be very hard for him to convince the courts to let him hold the meeting before the Insider Trading issue is resolved -- which could take years.
Readers of this thread already know my view (see "When the company is doing well, management is in control, when not, investors are" post) that this merger won't happen because there is no value creation in the merger (at least not to Allergan's shareholders).
Readers of this thread also know my general description of "Soft Powers" (doctor letters, media barrage, investor presentations, politician involvement, regulators attention, lawsuits, and other actions that do not involve any changes to the company or it's capitalization) and "Hard Powers" (restructuring, borrowing, shares buyback, acquisitions, shares buyback, management buyout, etc.). Valeant never had much Soft Power to begin with (PS has a little bit of Soft Power -- being that Ackman is somewhat of a media personality, and PS is certainly a highly litigious hedge fund), and have used up every last ounce of Hard Power at their disposal to make this bid. Allergan, thus far, have managed to keep V+PS off balance almost entirely with Soft Power. It has made one Hard Power move (the restructuring), and is now in position to immediately make some major additional moves. (Technically, the LiRIS license deal is also a Hard Power move; but it is too small to make a dramatic difference by itself).
So, to answer the original question: What Allergan has been doing is more likely, in my view, to prevail than not to; so I wouldn't go around second-guessing.
Dan.