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The Congressman's letter reported in the article below had been provided to Forum participants earlier that day, and is available from a link above the Forum report that defined the legal questions and communication issues relevant to investors:

  • May 21, 2014 Forum Report: Questions About Shareholder-Hosted Meetings of Shareholders

NOTE: The Shareholder Forum is addressing the Allergan-Pershing Square-Valeant contest only as an observer of the proposed investor communications.

 

Source: Wall Street Journal, May 28, 2014 article

THE WALL STREET JOURNAL.  |  MARKETS


Markets

Lawmaker Raises Concerns to SEC About Ackman's Allergan Referendum

Regulator Is Expected to Review Proxy Materials Pershing Square Has Filed

 

By David Benoit and Liz Hoffman

May 28, 2014 6:33 p.m. ET

A U.S. congressman is asking the Securities and Exchange Commission to take a closer look at William Ackman's unusual effort to poll Allergan shareholders amid the Botox-maker's takeover battle with Valeant Pharmaceuticals International Inc.

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. Pearson's remark.

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 letter said.

On Wednesday, Valeant announced it would sell the rights to a suite of skin-care products to Nestle SA to help ease antitrust concerns.

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.

Write to David Benoit at david.benoit@wsj.com and Liz Hoffman at liz.hoffman@wsj.com

 

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