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SEC is investigating bid by Valeant and Bill Ackman for Allergan

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The Securities and Exchange Commission is looking into an attempt to buy Allergan Inc.
Allergan contends Bill Ackman's hedge fund committed insider trading when it bought 10% of Allergan shares
Pershing Square Capital Management denies wrongdoing in its effort to buy Allergan

The Securities and Exchange Commission is looking into the way a Canadian pharmaceutical company and activist investor Bill Ackman have tried to buy Botox maker Allergan Inc. of Irvine.

Word of the investigation came less than a week after Allergan sued Valeant Pharmaceuticals International Inc. and Ackman's hedge fund, Pershing Square Capital Management, for alleged securities violations.

Allergan contends that Pershing Square committed insider trading by buying nearly 10% of the Botox maker's stock in the days before Valeant offered to buy the company.

On Thursday, Pershing Square said it had done nothing wrong in partnering with Valeant in its effort to acquire Allergan in a deal now valued at about $51 billion.

"We welcome the SEC's review of the facts," Pershing Square said in an emailed statement.

Valeant said in a statement: "We have no concerns about the legality of our actions and do not believe this has any impact on [the] timing of any deal."

It is common for the SEC to review complex financial transactions without taking action. SEC spokeswoman Florence Harmon declined to comment on the investigation.

Allergan also declined to comment.

In its lawsuit, Allergan alleged that Pershing Square committed insider trading by buying Allergan's stock without disclosing it was working with Valeant in an attempt to acquire the company.

Valeant and Pershing Square made their first bid for Allergan on April 22, causing Allergan shares to skyrocket — and adding millions of dollars of value to Pershing Square's investment in the company.

Ackman has insisted that the deal did not violate securities laws.

"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," Pershing Square said in Thursday's statement. "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 has rejected three offers from Valeant, calling them too low and not in the best interests of shareholders.

Valeant's latest offer is for $72 in cash and 0.83 shares of its own stock for each share of Allergan. Based on Thursday's closing price, that would amount to $164.16 per Allergan share.

Allergan shares gained 70 cents, or 0.5%, to $155.60 on Thursday. Valeant shares were up $1.87, or 1.7%, to $111.04.

Pershing Square has said it will schedule a special meeting of Allergan shareholders to replace several members of its board of directors with members who support the acquisition. The meeting has not yet been scheduled.

The proposed acquisition could have significant implications for the Irvine company's employees.

Valeant has accused Allergan of spending too heavily on research and development, with results that do not support the investment. It has indicated that it would improve Allergan's profits by slashing jobs and through other cost-cutting measures.

Last month, Allergan said it would cut 1,500 employees, most of them in Southern California, in a cost-cutting move aimed at fighting off Valeant's bid. The company also announced that it was closing facilities in Santa Barbara and Carlsbad. The cuts included the elimination of 650 research-and-development jobs, most of them in Irvine.

stuart.pfeifer@latimes.com

Twitter: @spfeifer22

Copyright © 2014, Los Angeles Times
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