Valeant Readies Hostile Exchange Offer for Allergan
NEW YORK ( The Deal ) -- Canada's Valeant Pharmaceuticals International
The expedited effort comes after Allergan, based in Irvine, Calif., last week rejected Valeant Pharmaceutical's latest raised, unsolicited offer. That bid is backed by activist Bill Ackman's hedge fund, Pershing Square Capital Management LP, which set up a joint venture with Valeant and owns most of a 9.7% stake in the target.
The exchange offer can't be consummated unless the company removes its 10% poison pill. However, even if it fails -- as expected -- an exchange offer is a good way to gauge investor sentiment for a deal.
"We have a clear path to completion of a transaction; we will be patient since time is on our side," Valeant said in a Tuesday presentation. "We believe that shareholders should have the opportunity to express their views, and we are confident that both Allergan and Valeant shareholders will support this combination."
Valeant and Pershing had indicated previously that an exchange offer was in the works. However, more details were provided Tuesday.
At the same time as Valeant tries for shareholder support for its hostile exchange offer, Pershing will be seeking consents to call a special shareholder meeting for investors to vote on removing a majority of Allergan's board.
Ackman needs an additional 15.3% of votes to call a meeting, which is unlikely to be held until November.
If he gets the necessary consents for a meeting, investors will also vote on a nonbinding proposal to install a slate of six Ackman-backed nominees.
Shareholder approval of the unsolicited exchange offer and a vote to remove incumbent Allergan directors would make it clear that not only do shareholders want to remove a majority of the company's board but they also want it to be sold at a specific price, people familiar with the situation said.
Both efforts could put enough public pressure on Allergan that it agrees to a Valeant tie-up.
If Ackman is successful at removing the majority of the board, and Allergan doesn't subsequently agree to negotiate with Valeant, he plans on petitioning the Delaware Chancery Court to hold another special election - that would be for a traditional proxy contest pitting Ackman's candidates against Allergan's incumbents.
The hedge fund manager might also shift to a strategy to remove the entire Allergan board. If successful, it could spur Delaware Chancery Court to move faster because a judge wouldn't want the company to continue on a rudderless course without a board of directors.