Allergan has filed a lawsuit against Valeant Pharmaceuticals International, Pershing Square Capital Management and its principal, William A. Ackman, alleging that Valeant, Pershing Square and Ackman violated federal securities laws prohibiting insider trading, engaged in other fraudulent practices and failed to disclose legally required information.
The complaint alleges, between February and April, 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.
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. Allergan reserves the right to seek additional remedies against all appropriate parties.
The complaint alleges, among other things, that:
Rule 14e-3, promulgated by the SEC under the Exchange Act, provides that, where any "offering person" has taken "a substantial step or steps" to commence a tender offer of a target company, any "other person" who is in possession of material nonpublic information relating to that tender offer is prohibited from purchasing or selling any securities of the target company, unless the information is publicly disclosed within a reasonable time prior to the purchase or sale.
The complaint alleges Valeant, who was and is the "offering person" within the meaning of this rule, took substantial steps to commence a tender offer for Allergan and tipped Ackman (and the entities he controls)—the "other person" within the meaning of this rule—to those otherwise undisclosed intentions, and that Ackman then traded in Allergan securities on the basis of this material, nonpublic information.
The complaint also alleges that in their takeover efforts, Valeant and Pershing Square have: