Hedge fund mogul Bill Ackman today accused Allergan (NYSE:AGN) chairman & CEO David Pyott of having a "disabling" conflict of interest in light of the unsolicited $47 billion takeover bid by his Pershing Capital Management hedge funds and Valeant Pharmaceuticals (NYSE:VRX, TSE:VRX).
Valeant’s and Pershing’s joint offer last month triggered a a poison pill move by Allergan to stave off the takeover.
Days later major Allergan shareholder Polen Capital Management said the company could do better. Pershing defended the bid, with Ackman urging Allergan’s board to concede to a meeting to explore the offer. That offer was also rebuffed, as was Ackman’s request to speak with Allergan lead director Michael Gallagher April 24 without Pyott or other Allergan management.
Today Ackman said it’s a mistake for the company to make Pyott its sole point of contact on behalf of shareholders, alleging a "self-evident" conflict of interest, according to Ackman’s letter to Gallagher.
"It is self-evident that as a result of the Valeant merger proposal, chairman & CEO David Pyott has a disabling conflict of interest that arises from the fact that he will lose his leadership role at the company and likely his job as a result of the transaction. As such, he cannot independently represent the company in considering the Valeant merger. For this reason, I attempted to contact you as the board’s lead director," Ackman wrote. " While I welcomed the opportunity to meet Mr. Pyott over the phone, the purpose of the call was to speak with you without management present as the lead director who we expected, based on the proxy disclosures, to be the board’s independent representative for shareholders in considering the Valeant bid."
In an email today to MassDevice.com, an Allergan representative said Ackman’s proposal still undervalues Allergan.
"Allergan maintains an open line of communication with stockholders and welcomes their feedback. However, as a co-bidder with Valeant Pharmaceuticals, we believe that Mr. Ackman’s views and interests are not aligned with those of other Allergan stockholders. We note that Mr. Ackman’s rhetoric focuses on, among other things, the benefits he sees in a transaction with Valeant," the representative wrote. "Nothing has changed since May 12 when, after a comprehensive review, conducted in consultation with its financial and legal advisors, the Allergan board unanimously concluded that Valeant’s proposal substantially undervalued Allergan, created significant risks and uncertainties for the stockholders of Allergan, and was not in the best interests of the company and its stockholders."
Ackman also accused Pyott of misleading Allergan shareholders about Valeant’s "business model, R&D strategy, accounting practices, financial performance, and operating approach."
"Allergan shareholders have also received the strong impression from Mr. Pyott that he intends to take a ‘scorched earth’ approach to a potential transaction with Valeant, and appears to be motivated more by personal animus than by what is in the best interest of Allergan shareholders," he wrote.