By David Benoit and Joseph Walker
Activist investor William Ackman and Valeant Pharmaceuticals
International Inc. pivoted strategy yet again as they moved to
ratchet up the pressure on Allergan Inc. on Monday to succumb to a
$52.7 billion takeover.
Mr. Ackman on Monday dropped an unusual plan announced last
month for a straw poll of Allergan shareholders and will instead
seek a more definitive vote to throw out a majority of the Botox
maker's board. Meanwhile, Valeant Chairman and Chief Executive J.
Michael Pearson said he was readying a hostile tender offer that
could take the bid directly to shareholders if the Allergan board
doesn't bless it, although it's not clear how his company's
alignment with Mr. Ackman would affect that effort.
In April, Valeant announced an unsolicited offer for Allergan
with support of Mr. Ackman's firm, Pershing Square Capital
Management LP, which before that announcement built a 9.7% stake in
Allergan. The Irvine, Calif.-based Allergan has resisted the
overtures, questioning whether the two companies' business models
made a good match.
On Friday, Valeant boosted its bid for Allergan for the second
time last week, raising the cash portion of the offer after Mr.
Ackman agreed to take a price cut on his own stake.
Allergan has yet to respond to either sweetened offer, but three
weeks ago it rejected the original bid without meeting with
Valeant. Allergan reiterated Monday that it would consider the
raised bids and urged shareholders not to take any action.
Pershing Square had previously announced an unusual referendum
that would have delivered a nonbinding vote, outside of typical
corporate voting rules, looking to urge the company to engage in
negotiations. Allergan had pledged to all but ignore such a
referendum, but cannot ignore the official process Mr. Ackman is
launching now. A special meeting to remove directors could happen
anytime between early August and late November, Mr. Ackman said
Monday. Directors were re-elected just last month and without a
special meeting wouldn't be up for re-election until the same time
next year.
When he earlier revealed the referendum, Mr. Ackman said a
special meeting could take too long.
Mr. Ackman said Monday that Pershing Square now decided to
forego the referendum because of concerns from Allergan
shareholders that such a vote could trigger Allergan's so-called
poison pill and would delay a special meeting. Allergan's poison
pill limits Pershing Square's stake to less than 10% and could
restrict talks between investors. The referendum was seen as a way
to sidestep the pill in terms of investor discussions, but Mr.
Ackman said in the end he couldn't tell institutional investors he
was sure the pill wouldn't be tripped.
"It's not entirely clear if the poison pill applies to the
referendum or not," Mr. Ackman said during a conference call with
analysts on Monday. "Shareholders also told us they didn't want the
referendum [because] it will delay the special meeting."
The attempt to seek the referendum had met some criticism,
including from California Congressman Rep. Edward Royce (R. Calif.)
who raised concerns about the plan in a letter to the head of the
Securities and Exchange Commission.
Mr. Ackman said he made his decision to take a price cut,
helping Valeant to boost its offer, after meeting other top
Allergan shareholders on Thursday. Mr. Ackman said they told him
they wanted a bid of $180 a share. Friday's offer would deliver
Allergan shareholders, outside of Pershing Square, $179.25 a share
in cash and stock.
Pershing needs consent from at least 25% of the company's shares
to hold the special meeting. Mr. Ackman said the Thursday meeting
included investors holding about 29% of the shares.
Mr. Pearson had already raised the possibility of a hostile
offer and a fight over Allergan's board; his partnership with Mr.
Ackman has largely been viewed as a way to get help in a campaign.
Pershing Square didn't reveal which six board members it would seek
to remove or name six candidates to replace them with.
Write to David Benoit at david.benoit@wsj.com and Joseph Walker
at joseph.walker@wsj.com
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