Allergan Compromises With Valeant, Ackman On Meeting

Allergan Inc. has settled pending litigation in Delaware with suitors Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman, and agreed to hold a meeting on Dec. 18 for its shareholders to vote on a controversial board overhaul plan, the parties confirmed Tuesday.

The compromise caps off escalating tensions over the meeting, pitched by Ackman and supported by the holders of more then 35 percent of Allergan's shares. The activist investor and Valeant sued the California company last month, accusing it of trying to dodge a special meeting to give itself more time to find an alternative to their $53 billion hostile takeover.

Allergan had previously scheduled the meeting for Dec. 18, but the accord, struck late on Monday, confirms that date won't change. The company said shareholders of record Oct. 30 will be able to vote at the summit.

"Given the special meeting will be held on the same date Allergan already announced, today’s announcement eliminates the distraction and cost of unnecessary litigation over the company’s bylaws," Allergan said in a statement.

The truce also eases Allergan's strict bylaws, under fire in court as Valeant and Ackman try to nail down details of the proposed shareholder meeting. A Delaware judge last week called an Allergan rule potentially restricting shareholders' ability to vote "quite a horse-choker of a bylaw."

Through his Pershing Square Capital Management LP hedge fund, Ackman holds a 9.7 percent stake in Allergan, making him the Botox maker's single-largest shareholder. He has leveraged his holding in recent months to launch a proxy contest that would unseat six of the company's nine directors, a move that could give Valeant a clearer path to its proposed buyout.

Allergan has been fighting to peel back investor support from the activist's push, repeatedly touting its vision as an independent company. Reports have also bubbled up that Allergan is eyeing an acquisition of its own to thwart the Valeant-Ackman play — potentially a multibillion-dollar merger with Salix Pharmaceuticals Ltd.

The target company continued to hype its standalone plans in its Monday statement, again calling Valeant's bid "grossly inadequate." The exchange offer, open through the end of the year, promises shareholders $72 in cash plus 0.83 shares in the combined company.

Still, the Botox maker has said it plans to outmatch that consideration by increasing per-share earnings by 35 percent next year and posting double-digit sales growth over the next five years.

Allergan has ripped Valeant's top brass and an acquisition-driven growth push that has rocketed its market value from less than $3 billion in 2010 to more than $50 billion today. The Canadian company envisions itself a top-five drugmaker, but Allergan has said its business model is not sustainable.

Monday's compromise leaves open litigation underway in California, brought by Allergan, alleging that Valeant and Ackman violated insider trading rules to form their unlikely partnership and pursue a takeover together — accusations the suitors have brushed off.

But in connection with the deal, Allergan will no longer seek the court's help in delaying or canceling the shareholder meeting, Pershing Square said in a Tuesday statement.

Pershing Square Capital is represented by Jay P. Lefkowitz, Matthew Solum, John P. Del Monaco and Danielle R. Sassoon of Kirkland & Ellis LLP and David C. McBride, Martin S. Lessner, Christian Douglas Wright, Tammy L. Mercer and Benjamin Z. Grossberg of Young Conaway Stargatt & Taylor LLP.

Valeant is represented by Brian T. Frawley of Sullivan & Cromwell LLP and Robert S. Saunders, Ronald N. Brown III, Brian D. King and Arthur R. Bookout of Skadden Arps Meagher Slate & Flom LLP.

Allergan is represented by Lisa A. Schmidt, Raymond J. DiCamillo, Susan M. Hannigan and Rachel E. Horn of Richards Layton & Finger PA, Peter A. Wald, Blair Connelly, Michele D. Johnson, Kristin N. Murphy and Virginia F. Tent of Latham & Watkins LLP and Theodore N. Mirvis, William Savitt and Bradley R. Wilson of Wachtell Lipton Rosen & Katz.

The case is PS Fund 1 LLC et al. v. Allergan Inc. et al., case number 10057, in the Delaware Court of Chancery.

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