NEW YORK ( The Deal) -- Botox maker Allergan ( AGN) said late Thursday it had approved consents delivered by activist investor Pershing Square Capital Management to hold a special shareholder meeting. The hedge fund run by Bill Ackman is seeking to hold the meeting to remove six of Allergan's nine incumbent directors.
The special meeting, scheduled for Dec. 18, is one tactic being used by the dissident to pressure Irvine, Calif.-based Allergan into accepting Canadian-based Valeant Pharmaceutical International ( VRX) unsolicited $54 billion tender offer -- a deal Pershing Square is backing.
Pershing so far has submitted consents of shareholders representing 34% of Allergan's shareholders, a little bit more than the 25% of outstanding shares the activist fund needed to have the meeting take place based on Allergan's bylaws. "According to a review conducted by Allergan and its independent inspector, Pershing Square has delivered requests that comply as to form with Allergan's bylaws from stockholders owning more than 25% of Allergan's shares ..." Allergan said.
Pershing Square, however, is skeptical about whether a review conducted by Allergan and its independent inspector is legally binding since there was no mention of the board in the press release, according to someone familiar with the firm's thinking.
The activist fund is also concerned about whether a submission of an additional 25% of consents for holding a meeting would be considered, according to this person.
Allergan could not be immediately reached to respond to those issues.
The approval of consents for a special meeting at most companies is typically a routine matter. However, Allergan's bylaws have particularly tough restrictions on investors seeking to collect approvals for calling a special meeting.
They require that investors that consent to calling a special meeting sign a document saying they plan to hold onto their shares until that meeting takes place, a requirement that has made it harder for the hedge fund to find qualifying shareholders.
At Allergan, each institution submitting a consent must fill out a multiple-page questionnaire and provide numerous verification letters, according to an attorney familiar with the process. 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.
Allergan noted in its release that shareholders that have requested the special meeting must further update the information provided to Allergan to "show ongoing compliance" as of the record date, Oct. 27, and 10 business days prior to the meeting.
In addition, Allergan on Aug. 27 filed a motion in federal court in California seeking to block the meeting from taking place by seeking to have the court prohibit the dissident investor's 9.7% stake from being counted towards holding the meeting. Allergan is alleging in a suit in the same court that Pershing Square had violated insider trading regulations when it acquired its stake because of its relationship to suitor Valeant.
The federal court already said it wouldn't expedite Allergan's lawsuit.
The removal of Pershing's stake could, if approved, effectively have the impact of cancelling the special shareholder meeting since the number of consents to hold it would drop below the 25% required. Pershing has sought to gather additional consents but it only has until Sept. 14 to submit more.
At the same time it submitted the consents to Allergan, Pershing filed a lawsuit in Delaware Court of Chancery seeking to have the court validate the consents that were filed.
Goldman, Sachs & Co. and Bank of America Merrill Lynch are serving as Allergan's financial advisors. Latham & Watkins, Richards, Layton & Finger, PA and Wachtell, Lipton, Rosen & Katz are serving as its legal counsel.