NEW YORK (The Deal) -- Activist investor Pershing Square Capital Management's efforts to push Allergan (AGN) into accepting a hostile blockbuster bid by Valeant Pharmaceuticals International (VRX) moved to the next stage late Friday after the dissident investor presented the required consents of shareholders to hold a special shareholder meeting at the target.
Pershing submitted consents of shareholders representing 31% of Allergan's shareholders, slightly more than the 25% of outstanding shares the activist fund needed to submit to have the meeting take place based on Allergan's bylaws.
Bill Ackman, who runs Pershing Square, is seeking to hold the meeting for the purpose of giving shareholders the opportunity to vote for removing six of Allergan's nine incumbent directors, as part of his effort to drive Allergan, best known as the maker of Botox, to accept Canadian-based Valeant's hostile bid.
Ackman has been pressing to have Irvine, Calif.-based Allergan sell itself to Canada's Valeant, which is pushing an unsolicited cash-and-stock $54 billion tender offer to buy the Botox maker. That offer is now set to expire Dec. 31 after being pushed back from Aug. 15 earlier this month because of concerns that the dissident investor did not have a sufficiently large number of investors agreeing to back his campaign. The tender offer is also part of an effort to gauge shareholder sentiment for the potential deal and to drive Allergan's board to the negotiating table.
The next step is for Allergan to set a date for the meeting. Its bylaws require that the meeting take place no later than 120 days after the consents were delivered so it is likely the company, which is fighting the offer tooth and nail, will challenge the votes for the meeting at the same time that it seeks to delay it until Dec. 22.
Officials from both Pershing and Allergan did not return requests for comment on when the meeting might take place.
Pershing owns most of a 9.7% Allergan stake and as a result only needed the backing of 15.3% of the company's shareholders to call the meeting. But Allergan bylaw requirements that investors that indicate consent to calling a special meeting sign a document saying they plan to hold onto their shares until that meeting takes place has made it harder for the hedge fund to find qualifying shareholders.
In a statement, Pershing said that, over the next few weeks, it expects to deliver additional requests from shareholders who are in the process of completing the required documentation. Specifically, any participating investor that sells shares prior to the meeting can no longer have those shares counted towards the minimum 25% Pershing needs to call the meeting.
Nevertheless, a person familiar with the situation noted that the investors agreeing to participate are long-term investors that Pershing believes will be there at the time of the meeting. Pershing's Ackman has received the backing of 35 large investors and is seeking additional support from smaller investors in an effort to make sure that he still has more than 25% at the time of the meeting.
"It's a miracle Pershing got investors to participate," said an attorney familiar with the situation.
The attorney noted that in most cases investors seeking to consent to participate in a vote to hold a special shareholder meeting must fill out a one page form. At Allergan, he noted, each institution must fill out a multiple page questionnaire and provide numerous verification letters. Investors must provide a spreadsheet with information about every trade the fund has made in Allergan over the previous two years, a prospect the dissident has argued is complicated and time consuming and raises proprietary trading issues.
"Many funds consider their trading info proprietary and don't want to disclose it," the attorney said.
In one case, he added, a shareholder put together a package that was 174 pages long with 85 signatures in it. "It probably took tens of thousands of dollars of legal work and lots of internal time," he said.
In a statement Allergan said its board "continues to believe that Valeant's unsolicited exchange offer is grossly inadequate and substantially undervalues Allergan."
Pershing also launched a pre-emptive strike as part of its effort to make it more difficult for Allergan to contest the validity of some of the consents submitted. At the same time that it submitted the consents to the company, Pershing also filed a lawsuit in Delaware Court of Chancery seeking to have the court validate the consents that were filed.
The submission of the consents and the Delaware lawsuit comes after a California federal judge on Thursday declined to expedite an insider trading lawsuit filed against Pershing by Allergan.
The decline to expedite by the court was a major victory for Pershing, people familiar with the situation said. For one thing, the California court indicated that it had no intension of inserting itself into issues about calling special shareholder meetings, which it said was firmly within the jurisdiction of the Delaware court.