Wolves Close In as Allergan Defends against Hostile Takeover

Paulson & Co., a hedge fund led by John Paulson, has reportedly scooped up more than 6 million shares of hostile takeover target Allergan, giving the fund more than 2% of the company.

The New York Post says that regulatory filings show that New York City-based Paulson & Co. already owns more than 1 million shares of Valeant Pharmaceuticals and the new position is expected to be in support of the Valeant-led hostile takeover. According to Fidelity, Valeant CEO Michael Pearson has said he was "delighted" at the disclosure of Paulson & Co.'s stake in Allergan.

Valeant, which is known for running acquisitions in a manner that maximizes immediate profit-making potential at the expense of R&D and future product development, had offered about $53 billion for the maker of Botox and other lesser known drugs. As we recently reported, that offer was rejected by Allergan's board of directors, which led to the announcement that Valeant would be taking its offer directly to Allergan's shareholders.

This latest twist in the saga, first reported by Reuters, will rank Paulson & Co. among the 15 largest Allergan shareholders, according to Thomson Reuters shareholder data as of March 31. Valeant needs support from at least 25% of Allergan shareholders in order to proceed with its plan to call a special meeting to elect new directors to Allergan's board who could vote in support of Valeant's offer, thus paving the way for a takeover of the company.

According to Reuters, Allergan and Pershing Square Capital Management, which is led by activist investor William Ackman, have agreed that special meeting will not trigger Allergan's so-called "poison pill" measure, the companies said on Friday. Ackman is said to hold about 9.7 percent of Allergan, which, combined with the more than 2 percent held by Paulson, could put the raiders within striking distance of the required 25 percent.

Reuters reports that Pershing Square had filed suit in Delaware earlier this month seeking confirmation that soliciting proxies to call a meeting and replace board members would not trigger the pill. "The rights agreement was drafted in a manner to allow Allergan stockholders to seek to call a special meeting, and the stipulation simply makes it clear how the bylaws and the rights agreement work together," Allergan spokeswoman Bonnie Jacobs said in a statement emailed to the news service.

Clive Minchom, writing for Jewish Business News, says that the agreement to not pursue the suit "also added the important proviso that shareholders agreeing to call for such a meeting must not already have made a choice to commit to tender their shares to the bid--which certainly would trigger the poison pill."

Stephen Levy  is a contributor to Qmed and MPMN.

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