THE WALL STREET
Raises Concerns to SEC About Ackman's Allergan Referendum
Expected to Review Proxy Materials Pershing Square Has Filed
David Benoit and
May 28, 2014 6:33
A U.S. congressman is asking the Securities and Exchange Commission to
take a closer look at
unusual effort to poll
Allergan shareholders amid the
Botox-maker's takeover battle with
Valeant Pharmaceuticals International
Earlier in May, Mr. Ackman's Pershing Square Capital Management LP
said he would pursue a nonbinding vote of Allergan shareholders,
hoping to pressure Allergan to negotiate with Valeant, whose advances
it has so far spurned. Valeant on Wednesday raised its bid to about
$49 billion, which Allergan said it would consider.
Pershing Square, which is teaming with Valeant on the bid, is holding
the referendum outside of Allergan's typical corporate election
procedures. Allergan has pledged to all but ignore the vote.
In a letter dated Tuesday, Rep. Edward Royce (R., Calif.) expressed
concerns about the referendum to SEC Chairman
Mary Jo White,
saying the "strategy being used in this case could make it difficult
for shareholders to truly understand what is occurring."
Mr. Royce's district includes areas just north of Irvine, Calif.,
where Allergan is based. A political-action committee, or PAC,
associated with Allergan gave $5,000 to Mr. Royce's 2014 campaign,
according to Open Secrets, which tracks political donations.
"This is the first shadow shareholder referendum of its kind filed at
the SEC, and it's at the expense of shareholder transparency," Mr.
Royce said in a statement Wednesday. "My immediate concern is that the
SEC performs a thorough review of the details of this filing with that
transparency in mind. Allergan's investors and the U.S. capital
markets deserve nothing less."
The SEC is expected to review the proxy materials Pershing Square has
filed. An agency spokesman declined to comment.
Mr. Ackman defended his effort Wednesday.
"There is nothing more transparent than a vote of the shareholders
under the SEC's proxy rules," Mr. Ackman said in an interview.
Valeant Chief Executive Michael Pearson said Wednesday at a
presentation to investors and analysts that Allergan was "sure
spending an awful lot of time trying to get [the referendum] outlawed
and not to happen." He didn't elaborate.
An Allergan spokesman said the referendum was "a self-serving
exercise" and declined to comment on Mr. Royce's letter or Mr.
Separately, a bipartisan group of lawmakers urged antitrust regulators
to look closely at the proposed merger, saying it could have
"significant anticompetitive consequences" for patients and doctors.
In a letter Tuesday to the Federal Trade Commission, the group — three
Democrats and five Republicans — said the deal, which would grow
Valeant's market share for certain skin- and eye-care products,
including wrinkle-reducer Botox, could lead to price increases.
"The consolidation of market share in Valeant may allow it to drive up
prices for consumers and patients while limiting product options," the
On Wednesday, Valeant announced it would sell the rights to a suite of
skin-care products to
Nestle SA to help ease
The lawmakers also said Valeant could gut Allergan's spending on
research and development. Allergan spent 17% of its revenue on R&D
last year, compared with 3% at Valeant, which typically focuses on
acquiring late stage drugs, rather than developing new ones.
David Benoit at
email@example.com and Liz Hoffman at