Allergan Board Excoriated in Takeover Saga

     LOS ANGELES (CN) – Billionaire William Ackman’s plan to take over Allergan found support in a new federal shareholder action amid reports that Activis put in a $60 billion bid.
     Mary Tolaro, an Ohio-based Allergan shareholder, filed a derivative and direct class action complaint against Allergen’s board of directors on Wednesday.
     The lawsuit comes on the heels of an adverse ruling against Allergan shareholders in the Delaware Chancery court, which on Nov. 7, found that it is too early to let stockholders install board members favorable to the takeover.
     Ackman is aggressively pursuing Allergan through his hedge fund, Pershing Square Capital Management, which has teamed up with Canadian firm Valeant Pharmaceutical International to mount a hostile takeover of the company.
     On Aug. 1, the pharmaceutical filed a federal complaint in Santa Ana to keep Allergan’s board of directors intact. Valeant and Ackman wanted to install executives more receptive to a merger; the Allergan board had rejected Pershing’s unsolicited offer more than two years ago.
     Pershing and Valeant made a $54 billion offer for the company in June, which Allergan again rebuffed.
     U.S. District David Carter dealt the company a blow last week when he declined to block Pershing from voting its 9.7 percent stake at a Dec. 18 Allergan shareholder meeting. Allergan has appealed.
     In another twist in the saga, Bloomberg reported this week that Irish firm Actavis is negotiating a deal with Allergan to acquire the company for $60 billion and beat off Ackman’s acquisition.
     Tolaro’s shareholder complaint meanwhile says that Allergan directors are more interested in protecting their salaries and bonuses than protecting stockholders. Their rejection of the Valeant deal contravenes advice from investment bank Goldman Sachs, according to the complaint.
     Since 2011, CEO David E.I. Pyott has earned $15.7 million per year and holds Allergan options worth $350 million, the complaint says.
     “Allergan’s Board ignored Goldman Sachs’ advice and instead embarked on a course of conduct designed solely to entrench the individual board members in office and to deter an acquisition by Valeant at all costs, and regardless of the premium offered by Valeant,” Tolaro says.
     The lawsuit echoes recently reported claims that the Allergen board launched a smear campaign against Valeant, in an attempt to hurt the company in the stock market.
     Tolaro notes that Pyott, the Allergan CEO, met with Valeant shareholders in Canada on Nov. 3, and badmouthed the company to drive down the price of its stock and take the air out of the proposed takeover.
     “Allergan had never before met with Valeant’s shareholders, and the meetings had no discernible purpose other than to injure Valeant and depress its share price in order to attempt to make Valeant’s acquisition proposal look less favorable,” the complaint states.
     Alleging breach of fiduciary duty and breach of duty of honest service, Tolaro wants the judge to make the Allergan board reconsider offers for the company that are in the best interest of shareholders.
     In addition to Pyott, directors Deborah Dunsire, Michael Gallagher, Trevor Jones, Louis Lavigne Jr., Peter McDonnell, Karah Parschauer, Timothy Proctor, Russell Ray and Henri Termeer are named as defendants.
     Tolaro is represented by Joseph Cotchett with Cotchett, Pitre & McCarthy of Burlingame, Calif.

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