A Delaware Chancery judge declined Friday to cancel the trial over Bill Ackman and Valeant Pharmaceuticals International Inc.'s bid to compel a special shareholder meeting as part of their $53 billion hostile takeover campaign of Allergan Inc., after the Botox maker argued its OK of the suitors' request mooted the issue.
At a hastily called status conference in Wilmington, Chancellor Andre G. Bouchard said several issues still required a full evidentiary record, especially the claims that Allergan's board members breached their fiduciary duties by applying bylaws the suitors allege throw up unreasonable roadblocks to stockholders trying to call a special meeting.
The chancellor left his calendar for the case alone, keeping it on the expedited timeline he set on Aug. 25, with proceedings scheduled to start Oct. 6 and expected to last three days.
“I realize there is some fluidity to this case, and perhaps some issues have been mooted,” Chancellor Bouchard said from the case. “But it looks to me like there are a fair amount of factors in play.”
The issue, in one of the fiercest buyout fights in recent memory, came to the chancellor after Allergan last week approved the request from Valeant and Pershing Square Capital Management LP hedge fund for the special meeting, at which shareholders will have the opportunity to vote out six of Allergan's nine directors and perhaps clear a path for a Valeant takeover.
Ackman and Valeant sued Allergan in August, hoping to have the court compel a meeting, and a few days later, the target said it would hold a stockholder meeting Dec. 18, a date the suitors are trying to have pushed up.
Allergan validated Ackman and Valeant's meeting request last week after they got backing from more than 25 percent of shares, and contacted the court contending a trial was no longer needed.
In court Friday, Ackman's fund argued that Allergan's meeting approval didn't moot anything.
Allergan had given no assurances the meeting would actually take place, leaving open the possibility it could cancel the summit and pull the rug from under Ackman and Valeant, argued David C. McBride of Young Conaway Stargatt & Taylor LLP.
When fast-tracking the suit in August, Chancellor Bouchard questioned whether Allergan actually wanted to hold a special meeting, noting a separate lawsuit the target filed in California federal court looking to enjoin Ackman's fund from voting the roughly 9.7 percent stake it holds.
McBride also argued Friday that there was still the matter of the challenged bylaws, which are being questioned over both their validity and whether directors breached their fiduciary duties by applying them, and the issue of forcing an earlier meeting might still be on the table.
For its part, Allergan contended that if the suitors wanted to challenge the validity of the bylaws, that could be done through briefing and decided solely on the pleadings.
Having a full discovery, deposition and trial schedule would just allow Ackman and Valeant to come into court and raise all sorts of hypothetical arguments and conjecture, said Theodore N. Mirvis of Wachtell Lipton Rosen & Katz.
“They came into court looking for a special meeting,” Mirvis said. “Since then, they got their answer. They need to take 'yes' for an answer.”
The battle in Chancery Court is another chapter in one of the most watched and knotted takeover fights of the year, which is attracting attention because of both its immense 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 it is talking to Salix Pharmaceuticals Ltd. and at least one other company in an attempt to possibly defend against Ackman and Valeant's bid.
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.
The saga is poised to last for at least several more months, and Valeant recently extended the deadline for Allergan shareholders to throw their weight behind the deal until the end of the year.
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 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 Theodore N. Mirvis, 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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