Activist investor Bill Ackman of Pershing Square Capital Management rebuked the board of directors of Allergan, Inc. (NYSE:AGN) for its inaction on the merger proposal with Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
In a letter to the board of directors of the BOTOX maker, Ackman said Allergan “distinguished itself in running the most shareholder-unfriendly, hostile defense process in the history of corporate America.”
The activist investor pointed out that Allergan, Inc. (NYSE:AGN) “wasted corporate resources, poisoned its relationship with shareholders and destroyed shareholder value.”
Allergan shareholders’ message to board
Ackman noted that the majority (75%) shareholders of Allergan, Inc. (NYSE:AGN) sold all or a portion of their stake in the company since Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced its bid in April.
The activist investor emphasized that Allergan’s largest shareholder also sold its entire position in the company. According to him, the shareholders were sending a message to the board that “they would not have sold if they believed that Allergan stock was worth more than current values.”
Ackman said prior to Valeant’s bid, David Pyott, the chairman and CEO of Allergan, Inc. (NYSE:AGN) sold $31 million worth of shares in the company, and other senior executives sold shares worth $51 million in the low $120s per share. He pointed out that the executives are “voting with their wallets on the company’s value.”
Consent to call for special meeting
The activist investor said they delivered consents from one-third of the shareholders of Allergan, Inc. (NYSE:AGN) to call for a special meeting. According to him, the one-third participation “vastly understated shareholder sentiment” on the merger proposal of Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
“I note that six of the top 10 shareholders participated in the consent process, which is remarkable in light of the extraordinarily burdensome, inappropriate, and unprecedented requirements to call a meeting, particularly for these large institutions for which your bylaws create even more cumbersome disclosure requirements,” according to Ackman.
Ackman says Allergan’s accusations are baseless
According to Ackman, the lawsuit filed by Allergan, Inc. (NYSE:AGN) against him, Pershing Square Capital Management and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) on allegations of misconduct and violation of the law has no basis.
Ackman pointed out that Allergan’s counsel (prior to its hiring) sent a memo to its clients explaining that Valeant, his firm and himself did not violate any laws in acquiring shares or in connection with the tender offer rules
“It is clear from the timing of the lawsuit – literally days before you knew that we were about to deliver consents from your largest shareholders to call a special meeting – that this was yet another attempt to frustrate the company’s shareholders’ opportunity to express their views on the board, the bylaws, and the Valeant transaction,” said Ackman.
Furthermore, Ackman said Pyott made matters worse as he “actually attempted to do a ten plus billion dollar deal before the special meeting” based on press reports. According to him, such action “will not offer any synergies of any consequence.
Ackman said, “His motives are clear: to try to stymie a transaction regardless of the cost to shareholders.”
Moreover, Ackman emphasized that Allergan’s shareholders were concern that the board “would rather destroy the company than do what is in the best interests of shareholders.” The shareholders also think that Allergan’s stock will decline significantly if Valeant’s deal does not go through.”
Ackman further stated that the behavior of the board and management of Allergan, Inc. (NYSE:AGN) destroyed the morale of the company, and will likely lead to the departure of its best talents while the business remains in limbo.