COLUMN-Allergan ordered to show 'business strategy' docs: Frankel

Mon Sep 22, 2014 6:54pm EDT
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(The opinions expressed here are those of Alison Frankel, a columnist for Reuters.)

By Alison Frankel

NEW YORK (Reuters) - Allergan's attempt to ward off a precedent-setting joint bid by the Canadian pharmaceutical company Valeant and the hedge fund Pershing Square continues to remake the rulebook for hostile takeovers.

On Monday, U.S. District Judge David Carter of Santa Ana, Calif., ordered Allergan to turn over to lawyers for Valeant and Pershing the complete records of recent board meetings and other strategic documents despite Allergan's arguments that the documents would expose its plans for fending off the hostile bidders.

The ruling came in Allergan's suit accusing Pershing of acquiring its shares based on insider information about Valeant's plan to acquire Allergan. Allergan is seeking to enjoin Pershing from voting its nearly 10 percent stake at a special meeting of Allergan shareholders scheduled to take place on Dec. 18.

The company's lawyers at Latham & Watkins had argued that Allergan is entitled to shield sensitive information under a "business strategy privilege" that dates back to takeover defense litigation from the 1980s and 1990s.

"This case is about one question: whether defendants violated federal insider trading and disclosure laws in connection with Valeant's proposed hostile attempt to take over Allergan," Allergan wrote in a brief. "Defendants nevertheless seek to compel Allergan to produce some of the most competitively sensitive information in its possession - information that has nothing to do with those claims and that if disclosed to defendants (one of whom is Allergan's direct competitor), would substantially harm Allergan and its stockholders by impairing Allergan's ability to attract strategic transaction partners and negotiate effectively with them."

Pershing and Valeant (represented by Kirkland & Ellis and Sullivan & Cromwell) said Allergan had concocted the supposed "privilege" by misreading Delaware Chancery and federal court precedent.

At most, the bidders said, targets of unsolicited bids are entitled to request a limited protective order to shield information related to their takeover defense. Allergan's large-scale redactions, according to Valeant and Pershing, far exceeded what's permissible.   Continued...