October 2, 2014
By Riley McDermid, BioSpace.com Breaking News Staff
There is more pressure on Botox maker Allergan Inc. to accept a hostile takeover bid from rival Valeant Pharmaceuticals International, Inc. after shareholder advisory firm ISS has asked the company to give its shareholders a chance to vote on any large, buyout-blocking acquisitions, reported Reuters Thursday.
Allergan has sought to dodge the buyout by snapping up Salix Pharmaceuticals, Ltd. for cash, a deal would not require a shareholder vote and could make Allergan’s newly combined company to large for any acquirers.
The firm joins Allergan’s second largest shareholder, T.Rowe Price, who last Friday urged Allergan to hold off on major acquisitions before the Dec. 18 meeting. T. Rowe said it was concerned that involving Allergan in a large acquisition could put of other suitors.
“[These investors] credible argument that the board should give shareholders a deciding vote on any large, buyout-blocking acquisitions,” ISS said.The note from ISS is unusual, because the firm usually works behind the scenes with investors, including large institutional players like mutual funds.
“To point out that the board has authority to approve an all-cash acquisition without shareholder approval is to point out the irrelevant: the question is not what the board can do, but what the board should do,” ISS said in a report sent to clients on Wednesday.
Activist hedge fund investor Bill Ackman has been heavily involved in the effort to force Allergan to accept a $53 billion bid for the company from Valeant.
More than 35 percent of a Allergan’s investors have already called for a special meeting for shareholders on Dec. 18, a move that’s been seen as a major step in forcing Allergan’s board to consider outside offers. But the company has not done enough to address investor discontent, said ISS.
“The board’s public response to this highly unusual airing of concern from its major shareholders has been only to reiterate generically its ‘focus’ on ‘enhancing stockholder value’ with nary a word addressing the more crucial question raised by each of those major shareholders,” wrote the firm.
Ackman’s $15 billion hedge fund Pershing Square Capital Management is a top shareholder in Valeant, which has been attempting a hostile takeover of Allergan since April. Valeant quickly upped its offer over a series of weeks and eventually launched a tender offer.
Both companies have been using the legal system to force their points. In August, Allergan sued the two companies, alleging their cozy relationship has run afoul of insider trading regulations
