William Ackman’s Pershing Square recently filed a Securities and Exchange Commission 14A form regarding statements he made about Allergan, Inc. (NYSE:AGN) in his recent investor letter.

Bill Ackman Pershing Square Allergan

Ackman praises his buddy Bill Johnson for working with a cancer research firm

The SEC’s 14A form is typically used to provide shareholders information to make “informed” votes at shareholder meetings.  Ackman starts this 14A, which in the title says the filing is related to Allergan, Inc. (NYSE:AGN), by taking about his old Ivy League chum, Bill Doyle, who he recruited to join Ackman at Pershing Square. Ackman makes a plug for the good work his college buddy is doing with a cancer research firm and then gives out Johnson’s phone number in case anyone reading the filing is suffering from a deadly cancer of the brain called Glioblamstoma,

Ackman asks people to call Doyle at (212) 652-4033 “and he will do his best to get the patient on Novocure’s therapy.”

Ackman discusses how Doyle introduced him to Valeant’s CEO

After the public service announcement, the Ackman filing serves up the red meat, discussing how it was Doyle who introduced Ackman to Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)’s CEO Mike Pearson – the genisius of one of the most unusual trades in history that, as reported in ValueWalk, is being challenged on the basis of insider trading.  ValueWalk had previously reported Congressional testimony where an SEC official implied the deal, where Ackman had knowledge of the Valeant takeover of Allergen before it was public and invested in the company ahead of the public disclosure, might not meet SEC approval.

In the filing Ackman goes on to speculate that corporate mergers typically don’t happen because top management has an incentive through their compensation structure to avoid a merger or takeover until the moment is right – for their compensation package.  Ackman writes:

“A CEO is incentivized to have his company’s stock price rise gradually enough to keep his job, but not so quickly so the amount of options and restricted shares he receives each year is maximized and granted each year at lower stock prices. Only until the CEO is ready to retire, in the last year or so of his term is he now incentivized to unlock hidden value and motivated to catalyze the sale of the company so he can receive additional accelerated change-of-control and other benefits along with a control premium.”

Allergan’s management has breached their fiduciary duty: Ackman

Calling Allergan, Inc. (NYSE:AGN) “Exhibit A in this kind of behavior,” Ackman charges Allergan’s management has breached their fiduciary duty by not properly examining the Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) offer.  Saying Allergan is “sandbagging,” an old golf term to mean holding back from giving your best effort until money is on the line, he notes that successive increases in Valeant’s offer have triggered Allergan management to raise their earnings estimates for the company.

In other words, when Allergan, Inc. (NYSE:AGN) approaches the first tee to negotiate the bets he tells everyone his golf handicap is an 18, providing him a one stroke hole benefit.  But on the course his real skills show a golfer with much more skill – and profit potential – than is previously known.