Allergan Grows “Increasingly Hostile” To Shareholders: Pentwater

The letter writing campaign around Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)’s pursuit of Allergan, Inc. (NYSE:AGN) continues. The two companies traded nasty letters earlier this week, but this time, it’s the management of one of Allergan’s institutional shareholders that’s sharing his piece.


Pentwater Capital is fed up with Allergan

Pentwater Capital holds a 1.3% stake in Allergan, which amounts to more than 3.9 million shares of the drug maker. In the letter that was published this week, the firm basically said that it’s fed up with the way Allergan management has been acting.

The firm points out that Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) made a “premium bid” to acquire Allergan, Inc. (NYSE:AGN) and that the Botox maker’s board continues to refuse to meet with Valeant for due diligence purposes. Pentwater CEO Matthew Halbower also pointed out that Valeant has even expressed a willingness to raise its bid.

In addition, he notes the media reports that claim Allergan has also received a premium bid from Actavis plc (NYSE:ACT).

Allergan’s board holds fast

Halbower calls Allergan’s refusal to engage with Valeant and Actavis a “type of shareholder destructive action.” He indicated that he thinks that this is why more than 35% of the company’s shareholders have voted to request a special meeting to remove Allergan’s board of directors.

The Pentwater Capital executive also accuses the drug maker’s board of growing “increasingly hostile towards its own shareholders.”

Pentwater blasts Salix acquisition reports

Although there has been nothing official announced, he also pointed to media reports that Allergan was considering trying to buy Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) for more than $12 billion in cash. The reason the company is supposedly thinking about this option is because by combining with Salix, it would be too big for Valeant to target.

Halbower notes that an acquisition of this size could prevent Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX), Actavis or any other interested company from buying Allergan, Inc. (NYSE:AGN). He added that they don’t understand how the company’s board “could possibly conclude it is an appropriate exercise of their fiduciary duty” to make that acquisition without first talking with Valeant and Actavis.

Pentwater expressed its strong opposition to Allergan agreeing to such a large acquisition without allowing shareholders to vote on it. The firm also stated that this would “render meaningless” the Dec. 18 shareholder meeting at which they will vote on whether to remove most of Allergan’s board. In addition, they believe that it would “destroy value for all Allergan shareholders by failing to explore the premium bids that have been presented to Allergan.”

And so the drama drags on. The only question now is who’s going to fire the next shot. It seems likely that Allergan will have something to say to this next. As of this writing, the Botox maker had not responded.