NEW YORK (The Deal) -- Bill Ackman's activist hedge fund Pershing Square Capital Management expects Allergan (AGN) shareholders will have an opportunity as soon as next month to consider its proposal to have the Irvine, Calif.-based company engage in discussions over Canada's Valeant Pharmaceuticals International (VRX) $45 billion hostile acquisition offer, according to a person familiar with the situation.
That, in turn would bring more pressure to bear on Allergan -- best known as the maker of Botox -- which so far has declined Valeant's cash and stock offer, saying it undervalued the company.
While Allergan's by-laws require that 25% of its shareholders back a request for a special meeting (they also give the company 60 days to call a meeting if a sufficient number of shareholders agree), Pershing Square's approach can bypass that prerequisite, a source said.
That's because the dissident is using a "shareholder referendum," process to see if it can drum up support for Valeant's bid.
On Tuesday, Pershing Square, which holds most of a 9.7% Allergan stake, said it was seeking to have Allergan's shareholders vote on a nonbinding proposal to have the company's board "engage in good faith discussions" with Valeant.
While the proposal would be nonbinding it could send a powerful message that Allergan shareholders are seeking a sale of the company. Pershing Square's proposal adds that it would in no way "preclude" the company from choosing to engage in discussions with other "parties potential offering higher value." Observers argue that the prospect of the meeting -- and its possible quick timing -- could be what it takes to drive Allergan to begin formal discussions with Valeant.