Allergan sues Valeant, Ackman for alleged insider trading

Sat Aug 2, 2014 7:37am EDT
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By Svea Herbst-Bayliss and Caroline Humer

(Reuters) - Botox maker Allergan Inc on Friday accused rival Valeant Pharmaceuticals International and billionaire investor William Ackman of violating securities laws by using insider information as they prepared a takeover bid for the drug company.

In a civil lawsuit filed in federal court in California, Allergan said Ackman's Pershing Square Capital Management and Valeant "hatched" an "improper and illicit insider-trading scheme" that allowed the hedge fund to buy Allergan shares, knowing about Valeant's planned $51 billion takeover bid.

Valeant and Pershing Square said the complaint was intended to prevent them from calling a special meeting of Allergan shareholders to vote on their board nominees.

"This is a shameless attempt by Allergan to delay the shareholders' fundamental right to call a special meeting," Ackman said in a statement. "Allergan's determination to waste money on a baseless lawsuit against its largest shareholder further demonstrates why this board of directors should be removed."

Without a shareholder meeting, Pershing Square and Valeant may not have the support they need to remove Allergan's "poison pill" measure or to ensure the success of a tender offer.

The lawsuit marks the latest twist in an increasingly hostile battle between the two drugmakers and one of the world's most prominent activist investors. Allergan has been fighting the takeover bid since it was announced on April 22.

From the beginning, outside lawyers said the structure of the Ackman partnership with Valeant was novel but not illegal. Now some experts say the suit could allow Allergan to seek fresh evidence to press its case and make life tougher for the $15 billion hedge fund.

The timing for Ackman's Pershing Square is also inopportune as it works to list one of its funds on an exchange in Europe.   Continued...

William Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks at the Sohn Investment Conference in New York, May 5, 2014.  REUTERS/Eduardo Munoz