Pershing Square files law suit over Allergan’s rights plan

William Ackman's Pershing Square Capital Management has filed a law suit in the Delaware Court of Chancery seeking a declaratory judgment confirming that its actions in connection with the solicitation and receipt of revocable proxies to call a special meeting of shareholders of Allergan (NYSE: AGN) will not trigger Allergan’s recently adopted rights plan, or “poison pill”.

Valeant Pharmaceuticals International (TSX: VRX) and Pershing Square are pushing for an acquisition of Allergan, which has so far rejected their twice increased bid price, the latest of $53 billion. Allergan has not responded, but Valeant announced that it is holding a press conference on Tuesday.

Allergan’s defensive reaction to the business combination transaction proposed by Valeant has raised speculation that Allergan might try to assert that a shareholder’s compliance with the unprecedented procedures in Allergan’s bylaws somehow triggers the poison pill. Using a poison pill to silence shareholders or prevent them from exercising their voting rights is unlawful. In light of Allergan’s actions to date, and in order to remove any concern shareholders might have in participating in calling for a special meeting, Pershing Square says it had no alternative but to take this action.