- On Friday morning, botox-maker Allergan announced that it had filed a federal lawsuit in the U.S. District Court for California's Central District against Valeant Pharmaceuticals, its ally Pershing Square Capital Management and Pershing head Bill Ackman.
- This is the latest skirmish in the ongoing battle between the two companies as Valeant continues its hostile takeover bid for Allergan. Pershing is a Valeant co-bidder that owns 10% of Allergan's shares.
- Allergan alleges that Ackman and Pershing took advantage of their access to non-public information and bought Allergan stock before Valeant had publicly announced its takeover bid.
The lawsuit is a significant escalation by Allergan and yet another effort to stave off Valeant's takeover bid -- or at the very least to boost Valeant's offer for the company.
Allergan claims that Pershing Square bought about $3.2 billion in stocks and securities between February and April of this year with full knowledge of Valeant's plans to announce a takeover bid at the end of April. That, in turn, allowed Ackman and Pershing Square to take advantage of a $1.2 billion stock appreciation after the takeover was announced and deprived selling stockholders the opportunity to profit from the bid. Allergan wants the District Court to declare that Pershing's actions amounted to insider trading and violated disclosure laws, and is asking the court to take back the shares Pershing bought between February and April.
This may be an opportunity for Allergan to boost its selling price by putting legal -- and, consequently, financial -- pressure on Valeant, whose latest offer of $173.24 per Allergan share has been met with skepticism. Allergan was hit with some bad news last week when one of its major shareholders, Capital Research and Management, dumped most of its Allergan stock in a vote of no-confidence. The company has responded by announcing plans to restructure and slash its global workforce by 13%. It also posted solid Q2 sales representing a 15.9% year-over-year improvement last week.