A Delaware Chancery judge agreed Wednesday to fast-track a lawsuit by activist investor Bill Ackman and Valeant Pharmaceuticals International Inc. looking to compel a special shareholder meeting as part of their $53 billion hostile takeover campaign of Botox maker Allergan Inc., questioning whether the target actually wants to hold a meeting in December.
At an emergency hearing in Wilmington, Chancellor Andre G. Bouchard said Ackman and Valeant's proposed timetable to try to force a meeting for shareholders to vote on overhauling Allergan's board, which would have the court consider in early October whether to order a meeting in mid-November, will serve the interest of justice in the case, and that the suitors had shown they had both plausible claims and the possibility of being irreparably harmed if their motion were to be denied.
The chancellor also voiced doubt over whether the special meeting date of Dec. 18 the Botox maker announced the night before would actually become reality, saying he “can't be blind” to Allergan's filing of a lawsuit of its own against Valeant and Ackman's hedge fund Pershing Square Capital Management LP, which holds a 9.7-percent stake in the target, in California federal court that, among other things, is seeking to enjoin them from voting their shares.
“It's pretty apparent to me that Allergan may not really want to have a special meeting occur at all,” Chancellor Bouchard said from the bench. “The exercise of stockholder franchise is a critical right and the loss of that right can rarely be easily remedied.”
The chancellor made clear he was speaking on the plausibility of the suitors' claims, not the validity, when evaluating the case and set the matter for trial over three days starting Oct. 6.
Allergan had announced Tuesday night that it planned to hold a special shareholder meeting Dec. 18, answering Ackman and Valeant’s call last week for it to be held before the end of the year.
Before Wednesday’s hearing, the suitors released a joint statement contending that the announcement provided a measure of uncertainty and accusing Allergan of trying to prevent shareholders from having a vote.
"We are confident that Allergan's desperate attempts to delay or prevent a special meeting of stockholders will not succeed, and that the special meeting will be held not later than Dec. 18," the statement read. "It is apparent that Allergan fears letting its stockholders have a voice, and we believe that its transparent efforts to prevent that will not stand."
After the hearing, Allergan fired off a statement of its own saying it fully supports shareholder rights and accusing the suitors of trying to hastily push through its own designs on a timetable.
“We believe Pershing Square and Valeant are now trying to hastily schedule the special meeting in order to facilitate Valeant’s grossly inadequate offer, and to mask Valeant’s continued poor operating performance,” Allergan said in the statement.
The battle in Chancery Court is the latest episode in one of the most watched and knotted takeover fights of the year, which is attracting attention because of its massive size and the unorthodox partnership between Ackman and Valeant.
Allergan has firmly and repeatedly resisted their overtures in favor of an independent strategy, and reports have surfaced that the Botox maker is talking to Salix Pharmaceuticals Ltd. and at least one other company in an attempt to possibly defend against Ackman and Valeant's bid.
On Friday the suitors filed the latest lawsuit in the saga, asking the Chancery Court to force a special meeting, where shareholders can vote to remove six directors, as soon as possible by enforcing the certificate of incorporation right of holders of 25 percent of Allergan's stock to call a special meeting.
The suitors have said they already have the backing of 31 percent of shareholders and claim Allergan's board has entrenched itself behind a preclusive poison pill, while simultaneously pursuing an alternative transaction that doesn't require stockholder approval.
In court Wednesday, Allergan argued that Ackman and Valeant did not show they had any plausible claims in their suit, and that the claims they are pursuing aren’t even ripe for adjudication.
The suitors asked for the special meeting the same day they filed the suit, and Allergan's board intended to consider the request at its next meeting, Allergan's counsel told Chancellor Bouchard.
“If in seven to 10 days there's a controversy, then we'll talk,” said William Savitt of Wachtell Lipton Rosen & Katz. “Until then, there is no colorable claim.”
Ackman and Valeant contended that Allergan is stalling, and doing so by implementing roadblocks through bylaws they argue both conflict with the company's charter and are facially invalid.
Pershing Square Capital is represented by Jay P. Lefkowitz, Matthew Solum, John P. Del Monaco and Danielle R. Sassoon of Kirkland & Ellis LLP and David C. McBride, Martin S. Lessner, Christian Douglas Wright, Tammy L. Mercer and Benjamin Z. Grossberg of Young Conaway Stargatt & Taylor LLP.
Valeant is represented by Brian T. Frawley of Sullivan & Cromwell LLP and Robert S. Saunders, Ronald N. Brown III, Brian D. King and Arthur R. Bookout of Skadden Arps Meagher Slate & Flom LLP.
Allergan is represented in the suit by Lisa A. Schmidt, Raymond J. DiCamillo, Susan M. Hannigan and Rachel E. Horn of Richards Layton & Finger PA, Peter A. Wald, Blair Connelly, Michele D. Johnson, Kristin N. Murphy and Virginia F. Tent of Latham & Watkins LLP and William Savitt and Bradley R. Wilson of Wachtell Lipton Rosen & Katz.
The case is PS Fund 1 LLC et al. v. Allergan Inc. et al., case number 10057, in the Delaware Court of Chancery.
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