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SEC Investigating Valeant Pharmaceuticals International (VRX), Pershing Square's Hostile Takeover Bid For Allergan Inc. (AGN)

8/15/2014 6:30:34 AM

SEC Investigating Valeant, Pershing Square's Hostile Takeover Bid For Allergan SEC Investigating Valeant, Pershing Square's Hostile Takeover Bid For Allergan

August 15, 2014
By Mark Terry, Breaking News Staff

The Security and Exchange Commission (SEC) is investigating a takeover bid of Allergan Inc. (AGN) by Canadian pharmaceutical company Valeant Pharmaceuticals International (VRX), and Bill Ackman’s New York hedge fund, Pershing Square Capital Management. Ackman’s Pershing and Valeant were preparing a hostile takeover bid. Allergan has responded with a lawsuit, citing insider trading, which is what the SEC will investigate.

In March, Pershing Square began purchasing over-the-counter call options, becoming Allergan’s largest shareholder, with about 10% of their stock. Valeant and Pershing Square announced their joint bid in April, resulting in a 15% stock increase, which provided Pershing with $1 billion in gains.

Allergan, located in Irvine, California, is best known for BOTOX, although the company has a complete portfolio of products in eye care, neurosciences, dermatology and urologics. Valeant Pharmaceuticals is headquartered in Laval, Quebec and operates in many areas including prescription dermatology, eye health, aesthetics, consumer products, neurology and oral health. Since 2008, Valeant has acquired more than 100 smaller companies.
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Both Pershing Square and Valeant have publicly stated that there was no wrongdoing involved in the deal. In a statement, Pershing Square said, “Valeant and Pershing Square formed a partnership in February and acquired a toehold position in Allergan before an offer was made to acquire the company in a merger transaction. There is nothing illegal, unethical, or improper in taking a toehold position before a merger is proposed, even if it is not wanted by the target’s management.”

Allergan’s lawsuit states, “Because of the crippling debt required to finance its many previous acquisitions, Valeant was unable to borrow enough money to acquire Allergan, and therefore needed an ally with capital to contribute — and found one in Ackman. Ackman, in turn, found in Valeant an incredible opportunity to buy Allergan stock with advance inside knowledge of a tender offer that was certain to cause the stock price to increase — guaranteeing him a massive return in record time.”

In its responding statement, Pershing Square said, “We have no concerns about the legality of our actions and do not believe this has any impact on [the] timing of any deal.”

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