Ackman has a new letter out to the director of AGN, see the full text below. Also see our story from yesterday, Hempton’s Bronte Capital Opens Short Position In Valeant


May 19, 2014

By U.S. Mail and Email:

Mr. Michael R. Gallagher

Lead Director

c/o Allergan, Inc.

2525 Dupont Drive

Irvine, CA 92612

Re: Allergan Governance Failures

Dear Mr. Gallagher,

Allergan is at a critically important stage in its history and it is essential that the board recognizes its fiduciary responsibilities and follows proper processes and procedures to protect and maximize shareholder value. Based on recent events, we are extremely concerned about governance failures at the company, and are writing an open letter so these issues can be addressed in a transparent manner.

Chairman and CEO David E. I. Pyott Has a Disabling Conflict of Interest

It is self-evident that as a result of the Valeant merger proposal, Chairman and CEO David Pyott has a disabling conflict of interest that arises from the fact that he will lose his leadership role at the company and likely his job as a result of the transaction. As such, he cannot independently represent the company in considering the Valeant merger. For this reason, I attempted to contact you as the board’s lead director. I did so, in part, because Allergan’s 2014 proxy provides:

“Contacting our Board of Directors

Any interested person, including any stockholder, who desires to contact the current director presiding over the executive sessions or the other board members may do so by writing to the Allergan, Inc. Board of Directors, Attn: Secretary, P.O. Box 19534, Irvine, CA 92623. Communications received will be distributed by our Secretary to the director presiding over the executive sessions or such other board member or members as deemed appropriate by our Secretary, depending on the facts and circumstances outlined in the communication received.”

“Mr. Gallagher, as the Board’s lead independent director, holds a critical role in assuring effective corporate governance and in managing the affairs of our Board. Among other responsibilities, Mr. Gallagher:

consults with the Chairman of the Board and other board members on corporate governance practices and policies, and assuming primary leadership role in addressing issues of this nature if, under the circumstances, it is inappropriate for the Chairman of the Board to assume such leadership;” [Emphasis added.]

Allergan, Inc.

May 19, 2014

Page 2 of 6

On April 23rd, I emailed Matt Maletta, Allergan’s Associate General Counsel and Secretary, to request an opportunity to speak with you. Mr. Maletta was very responsive and arranged a call the following day, but noted that Mr. Pyott and Jim Hindman, SVP of Investor Relations, would be joining you on the call. While I welcomed the opportunity to meet Mr. Pyott over the phone, the purpose of the call was to speak with you without management present as the lead director who we expected, based on the proxy disclosures, to be the board’s independent representative for shareholders in considering the Valeant bid.

On the call, Mr. Pyott and Mr. Hindman were silent until I addressed a question to Mr. Pyott which he answered. I then requested the opportunity to speak with you in executive session which you rejected. I then asked for your contact information so I could contact you directly in the future. You were unwilling to provide me with your contact information because you explained that you did not believe it was appropriate to speak to me alone. I then offered to speak with you with the board’s counsel present on the call, and you also refused this request. I find it inappropriate that Allergan’s lead independent director was unwilling to speak to a shareholder without management present.

The Board Erred in Not Meeting with Valeant Before Rejecting Its Proposal and in Designating Mr. Pyott as the “Only Member of the Board That Is Authorized to Speak with Shareholders”

Last Monday, Allergan rejected Valeant’s proposal without taking the opportunity to meet with Valeant management to discuss the transaction or to perform due diligence on Valeant. This was despite the fact that Valeant had previously stated publicly that its bid was negotiable. We note that the Valeant bid is comprised of stock and cash, and therefore the valuation of the proposal requires a detailed understanding of Valeant’s business, anticipated cost synergies, and other features of the transaction which can be best understood by meeting with Valeant management and having the opportunity to address any questions and concerns that the board may have.

Last Tuesday, we learned from our Bank of America representative that Mr. Pyott was conducting one-on-one meetings with Allergan’s largest shareholders. We requested a meeting with Mr. Pyott, but our request was rebuffed, and instead we were only offered a 15-minute phone call between the end of his last meeting of the day and his apparent need to make a flight. We told our BofA representative that we preferred an in-person meeting and explained that we would be happy to accommodate Mr. Pyott’s schedule and wait until the following week after Mr. Pyott had met with other large shareholders. BofA checked with the company and confirmed that the only opportunity we would have with Mr. Pyott would be a 15-minute phone call at the end of the day.

Allergan, Inc.

May 19, 2014

Page 3 of 6

Later that day, we briefly spoke with Mr. Pyott until he terminated the call 15 minutes later. On the call, we asked several questions about why Allergan rejected the Valeant proposal, and why the board did not meet with Valeant before doing so. Mr. Pyott would not answer these questions, but simply repeated that “the Valeant bid substantially undervalues Allergan.” At the end of the call, we reminded Mr. Pyott of his conflict of interest and requested the opportunity to meet with Allergan’s independent directors. Mr. Pyott then said that he was “the only member of the board that was authorized to speak with shareholders” and rejected our request to meet with the full board.

Mr. Pyott Has Behaved Inappropriately in Inaccurately Criticizing Valeant and Pershing Square

Over the last week, we have heard from numerous Allergan shareholders who have met with Mr. Pyott. During these meetings, Mr. Pyott, we are told, has denigrated Valeant, including making false and/or misleading statements about Valeant’s business model, R&D strategy, accounting practices, financial performance, and operating approach. Mr. Pyott’s statements are particularly troublesome because if they are accepted by Allergan and/or Valeant shareholders at face value, they could contribute to a decline in Valeant’s stock price which could affect the perceived value of the Valeant proposal. Allergan shareholders have also received the strong impression from Mr. Pyott that he intends to take a “scorched earth” approach to a potential transaction with Valeant, and appears to be motivated more by personal animus than by what is in the best interest of Allergan

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