Allergan, Inc. reported on August 1 that it had filed a lawsuit in the United States District Court for the Central District of California against Valeant Pharmaceuticals International, Inc., Pershing Square Capital Management, L.P., and its principal, William A. Ackman , alleging that Valeant, Pershing Square and Mr. Ackman violated federal securities laws prohibiting insider trading, engaged in other fraudulent practices, and failed to disclose legally required information. The lawsuit follows ongoing efforts by Valeant to acquire Allergan.

“After careful consideration, Allergan decided to file the lawsuit in order to ensure that all of its stockholders have the opportunity to make decisions regarding their investment in the Company based on compliant, full and fair disclosures, and to ensure that any stockholders voting on corporate matters acquired their shares in accordance with the law,” said Allergan in a company statement. “The Allergan Board of Directors is strongly committed to protecting the stockholder franchise and believes it is important that the rights of the Company’s stockholders not be infringed by the actions of one hedge fund that significantly profited (to the detriment of other stockholders and the market) by trading in Allergan securities while in possession of material non-public information regarding Allergan.”

Specifically, as the complaint alleges, Allergan said that between February 2014 and April 2014, Pershing Square purchased Allergan stock and securities then valued at over $3.2 billion from unknowing company stockholders while fully aware of Valeant’s nonpublic takeover intentions, thereby securing for itself and depriving the selling stockholders of value appreciation worth approximately $1.2 billion upon Valeant’s announcement of its initial offer on April 22, 2014.  In its complaint, Allergan is seeking, among other remedies, a declaration from the court that Pershing Square and Valeant violated insider trading and disclosure laws, and an order rescinding Pershing Square’s purchase of the Allergan shares it acquired illegally.

In response, J. Michael Pearson, chairman and chief executive officer of Valeant, said “We are disappointed that Allergan continues to stand in the way of its shareholders right to voice their views on a transaction with Valeant. Despite Allergan’s attempted roadblocks, we remain committed to pursuing this compelling combination, which will create an unrivaled platform for growth and value creation.”  

Pershing Square is targeting the middle of August for delivering shareholder requests to call a special meeting. :The independent proxy advisory firms are expected to issue their recommendations on this matter in the near future, and this lawsuit also seeks to distract from those forthcoming recommendations,” said Valeant in a statement.

Source: Allergan and Valeant Pharmaceuticals